Shri Om Prakash Maheshwari, JAMNAGAR V. The Assistant Commr. of Income Tax, Cen. Circle-1,, RAJKOT-GUJARAT

ITA 390/RJT/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5440 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY ATRI
• Keywords: Unexplained expenditure; Income from undisclosed sources; Document seized; Peak credit
• Section: 143(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Ms. Annapurna Gupta, Accountant Member And Shri TR Senthil Kumar, Judicial Member Omprakash M Maheshwari “Ronak” Plot No. 32-33, Rajnagar, Khodiyar Colony (Jamnagar) PAN No: ACFPM2743R (Appellant) Vs The ACIT, Central Circle-1, Rajkot (Respondent) Appellant by : Shri Sagar Shah, A.R. Respondent by : Shri Ajay Atri, CIT(DR) Date of hearing : 29-03-2022 Date of pronouncement : 31-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad, (in short referred to as CIT(A)), dated 06-09-2017, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2007-08. 2. At the outset itself, it was submitted that the solitary issue involved in the present appeal related to addition of Rs. 3,74,000/- made in the hands of the assesse as unaccounted income on the basis of notings from a document seized during survey conducted on the assesse. ITA No. 390/Rjt/2017 Assessment Year 2007-08 I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 2 3. Our attention was drawn to the grounds raised in this regard as under: (1) The order of the learned CIT(A)-11, Ahmedabad as well as the learned Assessing Officer is bad in law as well as on facts. (2) On the basis of facts and circumstances of the case, the learned CIT(A)-11, Ahmedabad as well as the learned ACIT., Central Circle-1, Rajkot has erred in law as well as on facts in making/confirming the addition on account of loose paper entry amounting to Rs. 3,74,000/- as unaccounted income from the seized material page No. Ill, 112 of Annexure-A-2. (3) On the basis of facts and circumstances of the case, the learned CIT(A)-11, Ahmedabad has erred in law as well as on facts in not appreciating the fact that the seized material is required to be considered in totality of the fact and not in piecemeal. He has for the A.Y. 2006-07 already taken his stand that the transaction mentioned in the said loose paper for which the addition is confirmed to the extent of peak mentioned in that year. The transaction appearing in the assessment year under consideration is part and parcel of that peak amount calculated and already added in the A.Y. 2006-07. In the said A.Y. 2006-07, the appeal of the assessee as well as the Department is dismissed and the view of peak credit take by CIT(A)-11, Ahmedabad gets finality and, therefore, the CIT(A)-11, Ahmedabad cannot take a different stand for the same loose papers in the year under consideration. 4. Ld. Counsel for the asessee pointed out that the documents ,which formed the basis of addition of unaccounted income, contained notings pertaining to the impugned assessment year i.e. A.Y. 2007-08 and the preceding assessment year i.e. A.Y. 2006-07 and the addition therefore was bifurcated to the said two years. He pointed out that while the Assessing Officer had made addition of all purported cash deposits noted in the document, the ld. CIT(A) had in the preceding year i.e. A.Y. 2006-07 restricted the addition to the peak deposit of the entire transactions in cash noted therein, including that of the impugned year also and that the said order of the Ld. CIT(A) had been upheld by the ITAT also vide its order in ITA No. 215 & 262/Rjt/2015 dated 28th February, 2017. Copy of the said order was placed before us. Ld. Counsel for the assssee contended therefore that in this background, there was no case for making any addition on account of the cash deposits noted in the document. Submissions in writing in this regard were filed before us is as under: I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 3 1. The solitary issuebefore the Hon'ble Bench in this appeal is in relation to an addition of one entry of 8500 USD @ 44 amounting to Rs. 3,74,000/- found during the course of search and seized material enclosed at pgno. 7 of paper book. Also, refer pg 51 of paper-book- Para 6 of assessment order. 2. The alleged addition is based on the debit and credit transactions of entries pertaining to two assessment years i.e. A.Y. 2006-07 and A.Y. 2007-08 and therefore, the addition was considered in that two-assessment year. In the assessment proceeding for A.Y. 2006-07 addition of Rs. 16,64,960/- was made as against this in the appellate proceeding the addition was reduced to Rs. 2,61,932/- considering the argument of peak and even the appeal of the department was dismissed by the ITAT, Rajkot bench. Thus, the order for A. Y. 2006-07 reached finality as regard the entries in that seized paper. Copy of Assessment order for A. Y. 2006-07 is enclosed at pg 20-26, the order of the CIT(A) is enclosed at page 27-31. Whereas, the copy of the order of Hon'ble ITAT is enclosed at page 32-44. 3. The Hon'ble ITAT Rajkot bench in my own case for A. Y. 2006-07 observed that: "No specific arguments are advanced before us as to how peak theory is not applicable on the facts of this case. As Ld. CIT(A) rightly notes, to take into account seized paper in totality, peak amount is required to be added back. Once we do so to that extent, unexplained payments stand reduced from the unexplained receipts. We uphold this approach and decline to interfere in the matter." 4. Thus, the view that has reached finality in A.Y. 2006-07 for the very same seized material cannot be different in A.Y. 2007-08. Once theory of peak is taken into consideration of the entries on that seized material and peak argument is accepted the same is equally applied for the year consideration too. A type copy of the seized material along with the calculation of the peak of the said entries are enclosed at 1 as Annexure A. Also, the working of the peak balance for A.Y. 2006-07 and the break-up of the addition made during the A.Y. 2006-07 by AO is tabulated at Annexure-B enclosed at pg 1. On perusal of the Annexure A enclosed Your Honor will observe and appreciate the fact that the addition made for the year under consideration of one entry of 8500 USD has already been considered while calculating the peak balance for A.Y. 2006-07 and therefore,no separate addition is called for. I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 4 5. Reliance is placed on the decision of Hon'ble ITAT, Rajkot bench in the case of Shri Hitesh S Katariya while considering the decision of Hon'ble Supreme Court in case Radhasoami Satsang wherein the tribunal has accepted the concept that the view take in one year on similar set of facts cannot be taken differently: "We also note that the assessee also claimed similar expenses in the earlier years, which were accepted by the Revenue in the assessment framed under section 143(3) of the Act.In view of the above, we are not inclined to uphold the order of the learned CIT (A)." ITA no.370/Rjt/2018 dated 25/06/2019 In view of the facts that the pg no. 112 of the seized material is required to be read as a whole and not contextually (see observation of AO at para 5.1 pg 4 of assessment order enclosed at pg 23 of paper-book) Therefore, once the peak is considered in A.Y. 2006-07 separate addition of only one entry falling in this calculation cannot be considered separately and addition of Rs. 3,74,000/- is required to be deleted. 5. The ld. D.R. was unable to controvert the above contention of the ld. Counsel for the asessee. 6. In this backdrop, we shall now proceed to adjudicate the issue before us. The fact of the case as we have noted from the assessment order is that during the course of search at the residential premises of the assessee on 23.8.2012, one annexure inventorized as annexure A-2 was found and seized. Page No. 6 of this annexure contained details of various cash transactions, which were recorded in US Dollars. These transactions were not recorded in the assessee's books of accounts. During the course of assessment proceedings, the Id. AR of the assessee submitted that the paper (in question viz., page No 6) was account of assessee's overseas supplier who had left them at his place when he had come to meet the assessee, which was found from his residence during search. The assessee also submitted that, they pertained to transactions carried, out by one M/s. Agarwal Export a partnership firm (wherein the assessee was a partner) and transactions of his brother's concern M/s. Dudani Metal I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 5 Agencies. In support of the transactions pertaining to these two entities, the assessee produced payment advise in which the US dollar amount got tallied with the notings mentioned on the seized papers. The assessee also produced copy of ledger account of M/s. Agarwal Exports, along with a copy of bank statement wherein the said export proceeds were appearing. For those transactions which were not reflected in the books of either Agarwal Exports and Dudani Metal Agencies, the assessee submitted that, the same could not be explained as some overseas supplier had left this at the residence of the assessee. The assessee also took the plea that the paper was computerized and had been prepared in form of US dollar currency and that it was an account of credit and debit of a business done by for supplier with that of other parties and that, as per his memory the paper pertained to a supplier/agent who had left this account with the assesseee. 7. The AO held that the replies submitted by the assessee was not acceptable because, the assessee had co-related most of the transactions on the said paper to transactions of Agarwal Exports (a firm in which he was a partner) and M/s. Dudani Metal Agencies (a concern owned by his brother). Therefore, he held, it was clear that this was not a dumb document. The AO noted that the assessee had explained all the entries as per these papers, except cash payment / expenditure and held that if some of the transactions on this paper were explained, for the rest of the transactions it could not be said that they were accounts of some foreign supplier, mistakenly left behind. The seized document/paper, he held, had to be read as a whole and not contextually. The onus was upon the assessee to explain the entire transactions, as the same was found from his possession. The transactions mentioned on page No 6 of annexure A-2 co-related with the transactions on page No 111 and 112 of this annexure. Hence, the notings were seen at more than one place. Therefore, the assessee's contention that the paper belonged to some supplier, who might have left it inadvertently at his place, lacked credence, as per the AO. It was also seen from this paper that, there were debit entries and credit entries. Both the debit and credit I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 6 entries contained details of cash TT and Bank TT. The amount of Bank TT had been explained from the books, whereas, the amount of Cash TT were not explained. Out of this, cash TT of USD 8500 pertained to the year under consideration. Hence, vide order sheet entry, the assessee was asked to show cause as to why the transactions amounting to USD 8,500/- should not be treated as unexplained in his hands and accordingly added to his total income. 8. In response to the show cause notice, the assessee submitted that, the entries on this page was in connection with his regular business transactions which were duly recorded in his regular books of accounts, which were through normal banking channel, in support of which the assessee produced a copy of concerned bank statement. The assessee also contended that, wherever the word 'Agarwal' or 'Dudani' was mentioned, these transactions were explained with corresponding recordings in their respective books of accounts, bank statements, payment advice and ledger accounts. It was therefore his contention that, whatever remained to be explained did not pertain to him. It was further contended that, the recordings were not in his handwriting but they were computer print outs. Since he was illiterate in operating computers, they did not pertain to him. He further submitted that, he was dealing only in Indian rupees and therefore the recording on these transactions were in USD and hence, it did not belong to him. 9. The A.O. did not accept the reply of the assesse stating that since most of the transactions noted in the paper had been correlated by the assesse to transactions with firms in which he was a partner or a concern owned by his brother, the rest of the transactions can be safely said to pertain to the assesse only since the document had to be read as a whole. Accordingly, the A.O. noting that transaction of 8500 US$ of cash relating to outward payment and pertaining to the impugned remained unexplained, he treated the same as unexplained expenditure of the assessee. Applying the exchange rate of US Dollars prevailing at that time, in the range of Rs I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 7 44/ US$ , the addition was worked out at Rs. 3,74,000/-. The same was upheld by the Ld.CIT(A). 10. We have gone through the seized document placed before us at paper book page no. 7. We have also gone through the assessment order for the preceding year, i.e A.Y. 2006-07 dated 21.03.2014 placed before us at paper book page no. 20 to 26 and have noted there from that on the basis of the very same document i.e Annexure-A to page no. 111 and 112,the A.O. had held the unexplained cash entries as relating to the assessee’s own transaction and held the entries on the right in side of the document as relating to cash outward and noting that the total of said entries for the said year amounted to Rs. 37,840 US$, addition of the same was made to the income of the assesse as unexplained expenditure by converting the same in Indian rupees at the prevailing exchange rate of US Dollars of Rs.44 per US$, resulting in addition of Rs. 16,64,960/-. 11. On going through the order of the Ld. CIT(A) for A.Y. 2006-07 placed before us at paper book page no. 27 to 37, we find that the ld. CIT(A) restricted the disallowance to Rs. 2,61,932/- equivalent to peak credit of US $ 5953 converted on the prevailing rate at Rs.44 per US$, accepting the alternative prayer of the assesse to adopt theory of peak. The relevant findings of the Ld. CIT(A) at Para 6 of his order is as under: 6. The cases relied by the appellant and also the submissions furnished were analysed. The appellant was not sure about the nature of notings. However, in view of the overall facts and circumstances of the case and also the alternative submission of the assessee to adopt theory of peak, it would be in the interest of justice to restrict to Rs. 2,61,932 which was equivalent to peak working of USD 5953/- on then prevailing rate at Rs. 44/-. Thus, the assessee got part relief. I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 8 12. Our attention was drawn to this working of peak submitted to the AO. also during assessment proceedings vide letter dated 11/03/2014 placed before us at paper book page no. 11 to 20 more particularly at page 14 is as under: “III. Your Honour has added all the entries which are unexplained and asked us to show cause as to why it should be not considered as unexplained expenditure/payment. The transaction recorded on the page is of Debit and Credit and it you believe that it might be a ledger account of the income and expenditure in US $ then the sum of all entries should not be added to total income of assessee but only to the amount of maximum amount outstanding i.e. Pick Balance for the period under consideration. We wish to draw your kind attention towards the following Chart which shows Pick Balance for the period of the transaction which in your opinion remained as unexplained: Debit Transaction Credit Transaction Balance 713 - (713) 1,240 - (1,953) 2,000 - (3,953) 2,000 - (5,953) - 4,000 (1,953) 2,000 - (3,953) - 8,500 4,547 7,176 - (2,629) 2,000 - (4,629) IV. Thus, considering the above chart maximum balance outstanding for the period is only US $ 5,953/-. You will appreciate that if at all you consider the paper related to me I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 9 then considering the debit of peak as Income the same has been earned in the F Y 2006 - 07 and not A Y 2006 - 07 and the income disclosed in the block period may be considered accordingly and the assed found is also offered for tax in the block period and thus you should not tax me twice on the Income as well as on assets.” 13. Ld. Counsel for the assesse pointed out that it was this working of peak which was accepted by the Ld. CIT(A). 14. We have also gone through the order of the ITAT for the impugned year dated 28/02/2017 placed before us at paper book page no. 32 to 44., accepting the restriction of addition by the ld. CIT(A) to the extent of peak credit at para 21 & 22 as under: 21. Now we take up the Revenue's appeal in ITA No. 262/Ahd/2015 for assessment year 2006-2007. The revenue has taken the following grounds. (i) Ld.CIT(A) has erred on facts and circumstances of the case in deleting the unexplained payments, (ii) On the facts and in the circumstances of the case and in law the Ld.CIT(A) has ought to have upheld the order of the AO. 22. No specific arguments are advanced before us as to how peak theory is not applicable on the facts of this case. As Ld. CTT(A) rightly notes, to take Into account seized paper in totality, peak amount is required to be added back. Once we do so to that extent, unexplained payments stand reduced from the unexplained receipts. We uphold this approach and decline to interfere in the matter. 15. Considering all the above since admittedly and undisputedly the peak of the cash transactions in the seized document, which was calculated after considering the cash transaction relating to the impugned year, has already been added in the hands of the assesse in the preceding assessment year i.e. A.Y. 2006-07, we see no reason I.T.A No. 390/Rjt/2017 A.Y. 2007-08 Page No Omprakash M Maheshwari vs. ACIT 10 for any addition therefore to be made in the case of the assesse for the impugned assessment year. 16. In view of the above, the grounds raised by the assesse are allowed. 17. In effect appeal of the Assessee is allowed. Order pronounced in the open court on 31 -03-2022 Sd/- Sd/- (TR SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad: Dated 31/03/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट