The ITO, Ward-1(4), RAJKOT-GUJARAT V. Smt. Sunitaben Sunilkumar Chokhani, RAJKOT-GUJARAT

ITA 4/RJT/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0473 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA DR SHRI HARISH RAN
• Assessee Lawyers: PC C
• Keywords: Unexplained cash credit; Peak credit; Deemed to accrue or arise in india

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] , ! , ! #$ BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.04/RJT/2014 ( / ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER WARD-1(4) RAJKOT / VS. SMT. SUNITABEN SUNILKUMAR CHOKHANI GOYAL, 3-TANTI PARK NEAR ASTRON SOCIETY KALAWAD ROAD, RAJKOT !) ./ ./ PAN/GIR NO. ABYPC 3722 C ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+. / APPELLANT BY : SHRI C.S. ANJARIA, DR ,-)+/. / RESPONDENT BY : SHRI HARISH RANPURA,CA (AR) 0/ / DATE OF HEARING 08/12/2015 12 / / DATE OF PRONOUNCEMENT 11/12/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-JAMNAGAR [CIT(A) IN SHORT] DATED 25/10/2013 PERTAINING TO ASSESSMENT YEAR (AY) 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO.04 /RJT/ 2014 ITO VS. SMT.SUNITABEN SUNILKUMAR CHOKHANI ASST.YEAR 2009-10 - 2 - 1. THE LD.CIT(A), JAMNAGAR HAS ERRED IN LAW AND ON FA CT IN RESTRICTING THE ADDITION OF RS.10,37,200, TO THE TU NE OF RS.70,500/- AND THEREBY DELETING THE ADDITION OF RS.9,66,700/- BY ADOPTING THEORY OF PEAK. 2. THE LD.CIT(A), JAMNAGAR HAS ERRED IN ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT THE UNEXPLAINED DEPOSITS REPRESEN TED THE CASH EARLIER WITHDRAWN FROM THE SAME BANK ACCOUNT BY THE SAME PERSON. 3. THE LD.CIT(A), JAMNAGAR HAS ERRED IN LAW AND ON FAC TS IN NOT GIVING AN OPPORTUNITY TO THE A.O. TO FIRST VERIFY T HAT THERE WAS A POSSIBILITY OF DEPOSITING THE SAME CASH WHICH WAS E ARLIER WITHDRAWN FROM THE SAME BANK ACCOUNT BY THE SAME PERSON. THE THEORY OF PEAK CANNOT BE APPLIED IF IT IS SHOWN THAT THE DEPOSITOR OF THE CASH WAS DIFFERENT FROM THE PERSON WHO WITHDREW THE CASH. 4. IT IS, THEREFORE PRAYED THAT THE ORDER OF THE LD.CI T(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGAINS T ADOPTING THE THEORY OF PEAK CREDIT BY THE LD.CIT(A). 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 21/12/2010, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.10,37,200/- AND RS.55,000/- ON ACCOU NT OF CASH DEPOSITS AND SUNDRY CREDITOR RESPECTIVELY. THE ASSESSEE BEI NG AGGRIEVED BY THE ASSESSMENT ORDER, PREFERRED AN APPEAL BEFORE THE LD .CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL; THEREBY THE ADDITION MADE BY THE AO WAS RESTRICTED TO RS.70,500/- OUT OF RS.10,37,200/- AND DELETED THE ADDITION OF RS.55,00 0/- MADE ON ACCOUNT ITA NO.04 /RJT/ 2014 ITO VS. SMT.SUNITABEN SUNILKUMAR CHOKHANI ASST.YEAR 2009-10 - 3 - OF SUNDRY CREDITOR. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD.DR SUPPORTED THE ORDER OF THE ASSESSING O FFICER, WHEREAS THE LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). THE LD.COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH (ITAT RAJKOT BENCH, RAJKOT) RENDER ED IN THE CASE OF SHRI KAUSHALBHAI RAMCHANDRA PABARI VS. ITO IN ITA NO.811/RJT/2010 FOR AY 2005-06, DATED 10/12/2010. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE COORDINATE BENCH REL IED UPON BY THE LD.COUNSEL FOR THE ASSESSEE. WE FIND THAT THE LD. CIT(A) HAS GIVEN FINDINGS IN PARAS-4.3 & 4.4 OF HIS ORDER, WHICH REA D AS UNDER:- DECISION : 4.3. I HAVE DULY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND ALSO GONE THROUGH THE DISCUSSION MADE BY THE AO IN THE ASSESSMENT ORDER. 4.4 IT CAN BE SEEN FROM THE WRITTEN SUBMISSION THAT , THE ID. AR HAD NO OBJECTION IF THE PEAK OF THE DEPOSITS ARE TREATED A S INCOME. THERE MAY BE SOME CASES UNDER INCOME TAX ASSESSMENT PROCEEDIN GS WHERE THERE ARE A LARGE NUMBER OF UNEXPLAINED CREDIT AND DEBIT ENTRIES OF A PERSON STANDING IN BOOKS OF ACCOUNT OF AN ASSESSEE. IN SUC H CASE THE AO MAY TEND TO ADD ALL THE AGGREGATE ENTRIES AS UNEXPLAINE D INCOME. HOWEVER, IN SUCH CASE IF THE ASSESSEE DOES NOT HAVE ANY EXPL ANATION FOR EVERY ITA NO.04 /RJT/ 2014 ITO VS. SMT.SUNITABEN SUNILKUMAR CHOKHANI ASST.YEAR 2009-10 - 4 - CREDIT OR DEBIT ENTRY OF A PERSON, STANDING IN THE BOOKS, THEN ONE OF THE MOST COMMONEST METHOD OF TAXATION WOULD BE THAT, TH E ENTRIES SHOULD BE SO ARRANGED IN SERIAL ORDER, THAT A CREDIT FOLLOWIN G A DEBIT ENTRY SHOULD BE TREATED AS REFERABLE TO THE LATTER TO THE EXTENT POSSIBLE AND THAT, NOT THE AGGREGATE BUT ONLY THE 'PEAK' OF THE CREDITS SH OULD BE TREATED AS UNEXPLAINED. THIS PLEA IS ACCEPTED AS IT IS LOGICAL AND ACCEPTABLE. THE BASIC IDEA BEHIND THE PEAK CREDIT THEORY IS TO AVOI D DOUBLE ADDITION AND TO BRING ONLY THE ACTUAL INCOME OF THE ASSESSEE TO SUFFER TAX, WHERE THERE ARE LARGE NUMBER OF UNEXPLAINED CREDIT AND DEBIT EN TRIES. IN BHAIYALAL SHYAM BEHARI V CIT (2005) 276 ITR 38 (ALL.) THE HIG H COURT UPHELD THE VIEW OF THE TRIBUNAL THAT WORKING OF THE PEAK SHOUL D BE CONFINED TO CREDITS AND WITHDRAWALS IN ACCOUNTS ADMITTEDLY NON- GENUINE. THUS IN THIS CASE, INSTEAD OF ADDING THE AGGREGATE OF DEPOS ITS, THE MOST APPROPRIATE THING WOULD BE TO WORK OUT THE PEAK OF DEPOSITS AND MAKE ADDITION OF THE SAME. SINCE IT IS ESTABLISHED THAT THE APPELLANT IS ENGAGED IN MAKING SOFT TOYS AND IS ALSO HAVING RETA IL PURCHASES AND SALES IN CASH, AND AS SUCH INCOME HAS ALREADY BEEN OFFERED TO TAX, THE MOST APPROPRIATE SOLUTION WOULD BE WORKING OUT THE PEAK OF THE DEPOSITS MADE INTO THE BANK ACCOUNT. I WOULD ALSO LIKE TO RELY UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: HON'BLE HIGH COURT OF CALCUTTA HAS IN THE CASE OF S ANJAY KUMAR JAIN VS. COMMISSIONER OF INCOME TAX 254 ITR 38 (CAL) HEL D THAT; 'TO FIND OUT THE PEAK CASH CREDIT, OUT OF SO MANY B OGUS CASH CREDIT, TAXABLE IS ONLY PEAK CASH CREDIT AMOUNT.' ITAT, HYDERABAD 'B' BENCH HAS IN THE CASE OF VENKAT AREDDY & CO. VS. DY. CIT, 73 TTJ (HYD) 401 HELD THAT; 'HOWEVER, THE PLEA OF THE ASSESSEE REGARDING THE PE AK OF THE AMOUNT OF THE CASH CREDIT ALONE BE ADDED, IS NOT WI THOUT MERIT AND WE FIND, ON THE BASIS OF THE DATES OF RECEIPTS AND DATES OF REPAYMENT OF THE IMPUGNED LOANS, THE AMOUNT OF PEAK CREDITS COMES TO RS. 33,000. THEREFORE, WE DIRECT THE AO TO RESTRICT THE ADDITION TO RS. 33,000 AND DELETE THE BALANCE ADDIT ION OF RS.12,500. WE ORDER ACCORDINGLY.' ITA NO.04 /RJT/ 2014 ITO VS. SMT.SUNITABEN SUNILKUMAR CHOKHANI ASST.YEAR 2009-10 - 5 - HON'BLE ITAT, CUTTACK BENCH HAS IN THE CASE OF ACIT VS. TRITAN HAPPY HOME (P) LTD.* 94 TTJ (CTK) 628 HELD THAT; 'ASSESSEE HAVING ACCEPTED THAT IT MADE BOGUS ENTRIE S TO COVER UP THE NEGATIVE CASH BALANCE AND MADE A DISCLOSURE OF UNEXPLAINED INCOME, CIT(A) WAS JUSTIFIED IN SUSTAINING ADDITION OF THE PEAK CREDIT.' HON'BLE ITAT, RAJKOT BENCH HAS IN THE CASE OF ITO V S. MAHESHKUMAR JAYANTILAL VORA 3 SOT 96 (RAJKOT) HELD THAT; 'WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD. THE ONLY DISPUTE FOR OUR RESOLUTION IS W HETHER PEAK CREDIT METHOD APPLIED IN THE FACTS OF THE CASE IS R IGHTLY APPLIED OR NOT. IT IS WELL ESTABLISHED THAT NO INCOME CAN BE T AXED TWICE. IT IS A/SO NOT IN DISPUTE THAT THESE DEPOSITS INCLUDE REF UNDS OF THE SUBSCRIPTION'S MADE FROM THE DEPOSITS. THUS, BY AGG REGATING ALL DEPOSITS, THEY TEND TO GET TAXED TWICE WHICH IS AGA INST THE PRINCIPLES OF TAXATION THE DECISIONS CITED BY THE L EARNED COUNSEL LEND SUPPORT TO THE CASE OF THE ASSESSEE AND HENCE WE DECLINE TO INTERFERE WITH THE DECISION OF THE CIT(A).' IN VIEW OF THE ABOVE AND CONSIDERING THE PEAK WORKI NG FURNISHED BY THE APPELLANT AO IS DIRECTED TO TAX PEAK BALANCE OF RS . 60,500/- AND REASONABLE PROFIT MARGIN ON SUCH PEAK BALANCE OF RS .10,000/- ON TRANSACTIONS MADE SUBSEQUENT TO THE PEAK BALANCE. T HUS THE APPELLANT GETS RELIEF OF RS.9,66,700/-. 5.1. THE ABOVE FINDINGS ON FACT OF THE LD.CIT(A) AR E NOT CONTROVERTED BY THE REVENUE. MOREOVER, THE COORDINATE BENCH, UN DER THE IDENTICAL FACTS, IN ITA NO.811/RJT/2010 FOR AY 2005-06, IN TH E CASE OF SHRI KAUSHALBHAI RAMCHANDRA PABARI VS. ITO, DATED 10/12/ 2010, HAS HELD AS UNDER:- ITA NO.04 /RJT/ 2014 ITO VS. SMT.SUNITABEN SUNILKUMAR CHOKHANI ASST.YEAR 2009-10 - 6 - 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT THE ASSESSING OFFICER, IN THE ABSENCE OF ANY COMPLIANCE FROM THE ASSESSEE, HAS ADDED THE TOTAL D EPOSITS OF RS.17,86,539. WHILE DOING SO, HE IGNORED THE FACT T HAT THE AMOUNT OF RS.17,86,539 WAS THE DEPOSITS MADE ON VARIOUS DA TES. HOWEVER, THE ID.CIT(A) HAS RIGHTLY CONCLUDED THAT ONLY THE P EAK OF THE DEPOSITS COULD BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE. WE AGREE WITH THE ID.CIT(A) ON THIS COUNT . HOWEVER, LEAPING A STEP FURTHER, THE LEARNED CIT(A) HAS ALSO CONSIDERED THE WITHDRAWALS THROUGH ATM TOTALING RS. 60,900 (RS.40, 000 + RS.20,900) AS UNDISCLOSED INCOME OF THE ASSESSEE. T HE ALTERNATIVE CONTENTION OF THE ASSESSEE CONCENTRATES ON THIS. TH E ARGUMENT OF THE ASSESSEE IS THAT SINCE THE AMOUNT OF RS.60,900 IS WITHDRAWALS THROUGH ATM, THE CIT(A) TREATING THE SAME AS UNDISC LOSED INCOME IS NOT JUSTIFIED. THE ASSESSING OFFICER HAS TAKEN R S.17,86,639 AS DEEMED INCOME U/S 68. IN SUCH CASE ONLY PEAK AMOUNT OF CREDIT IS CONSIDERED AS UNEXPLAINED CASH CREDIT. THERE ARE SE RIES OF TRANSACTIONS INVOLVING BOTH CREDITS AS WELL AS DEBI TS APPEARING IN THE BANK STATEMENT OF KOTAK MAHINDRA. THE SAME WAS ARRAIGNED BY THE ASSESSEE AS PER THE DATE OF EVERY CREDIT APP EARING AFTER DEBIT TO THE EXTENT REDUCING, ONLY THE PEAK OF THE AMOUNT CREDIT OF RS.2,89,204 WAS TREATED AS UNEXPLAINED INCOME. IN T HE CASE OF ACIT VS TRIATAN HAPPY HOME PVT LTD 94 TTJ 628 (CUT) SUCH PEAK TRANSACTION WAS RECOGNIZED AND WE ARE OF THE VIEW T HAT CIT(A) HAS JUSTIFIED IN TAKING THE PEAK AMOUNT OF CREDIT AS UN EXPLAINED CASH CREDIT BUT AT THE SAME TIME CIT(A) HAS TAKEN THE WI THDRAWALS OF RS.40,000 + 20,900 TOTALLING RS.60,900 AS UNEXPLAIN ED CREDIT, BUT WE DO NOT AGREE WITH THIS. AS PER THE PEAK THEORY T HE AMOUNT WHICH IS WITHDRAWN BY THE ASSESSEE HAS TO BE GIVEN CREDIT FOR. THEREFORE, WE DELETE THE AMOUNT OF RS.60,900 WHICH WAS ADDED O N ACCOUNT OF WITHDRAWAL FROM ATM. 5.2. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH PASSED IN ITA NO.811/RJT/2010 FOR AY 2005-06 IN THE CASE OF ITA NO.04 /RJT/ 2014 ITO VS. SMT.SUNITABEN SUNILKUMAR CHOKHANI ASST.YEAR 2009-10 - 7 - SHRI KAUSHALBHAI RAMCHANDRA PABARI VS. ITO (SUPRA), THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF T HE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUNDS RAISED BY THE REVENU E ARE REJECTED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 11 TH DAY OF DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ! ! ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11 / 12 /2015 . .,.. ./ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 6 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-JAMNAGAR 5. 9:, , , /DR,ITAT,RAJKOT 6. :EFG0 / GUARD FILE. / BY ORDER, -9, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) & ' , / ITAT, RAJKOT