Sri Kamalesh Dutta, Kolkata V. ACIT, CIR-1, DURGAPUR, Durgapur

ITA 408/KOL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99822 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: S M SURANA
• Keywords: Unexplained cash credit; Business income; Peak credit; Question of law
• Section: 143(3); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM ] ITA NO.408/KOL/2015 ASSESSMENT YEAR : 2010 - 11 ( A PPELLANT ) (RESPONDENT) SRI KAMALESH DUTTA - VERSUS - A.C.I.T ., CIRCLE - 1 , KOLKATA DURGAPUR (PAN: ADVPD 8723 D) FOR THE APPELLANT : SHRI S.M.SURANA, ADVOCATE FOR THE RESPONDENT : SHRI P.K.CHAKRABORTY, ADDL.CIT DATE OF HEARING : 15 .09 .2015. DATE OF PRONOUNCEMENT : 21.09.2015. ORDER PER SHRI M.BALAGANESH, AM 1 . . THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED CIT ( A ) IN APPEAL NO .53/CIT(A)/DGP/2013 - 14 DATED 31.03.2015 PASSED AGAINST THE ORDER OF ASSESSMENT FOR THE ASST YEAR 2010 - 11 FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LEARNED CIT ( A ) IS CORRECT IN CONFIRMING THE ADDITION MADE IN THE SUM OF RS. 85,46,861/ - U/S 68 / 69 OF THE ACT. 3. THE BRIEF FACTS OF T HIS ISSUE IS THAT THE ASSESSEE WHILE FILING THE RETURN OF INCOME FOR THE ASST YEAR 2010 - 11 HAD NOT CONSIDERED ONE BANK ACCOUNT MAINTAINED WITH INDIAN BANK ACCOUNT NO. 494127808 AND ACCORDINGLY, THE LEARNED AO ADDED THE ENTIRE DEPOSITS IN THE SUM OF RS. 81 ,83,104/ - AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. ON FIRST APPEAL, THE SAME WAS ENHANCED TO RS. 85,46,861/ - BY THE LEARNED CITA BY CONFIRMING THE ORDER OF THE LEARNED AO AND FURTHER ENHANCED BY RS. 3,63,757/ - . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: - ITA NO. 408/KOL/2015 SRI KAMALESH DUTTA A.YR. 2 010 - 11 2 1. THAT THE CIT(A) HAS ERRED, BOTH ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE ADDITION OF RS.81,83,104/ - MADE BY A.O. U/S 68 OF THE I.T.ACT, 1961 BY APPLYING SECTION 69 OF THE SA ID ACT. 2. THAT THE CIT(A) HAS, LIKE - WISE, FURTHER ERRED IN ENHANCING THE SAID ADDITION OF RS.81,83,104/ - BY FURTHER SUM OF RS.3,63,757/ - . 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND OR WITHDRAW ANY ONE OR BOTH THE GROUND (S) OF APPEAL ON OR BEFOR E THE HEARING OF THE APPEAL BY HON BLE BENCH. 4. SHRI.S.M.SURANA, ADVOCATE, THE LEARNED AR ARGUED ON BEHALF OF THE ASSESSEE AND SHRI. P.K.CHAKRABORTY, ADDITIONAL CIT, THE LEARNED DR ARGUED ON BEHALF OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL SUB MIS SIONS AND WE FIND THAT THE LOWER AUTHORITIES HAD CONSIDERED ALL THE DEPOSITS IN THE UNDISCLOSED BANK ACCOUNT AS INCOME OF THE ASSESSEE. BUT FROM THE INDIAN BANK DURGAPUR BRANCH VIDE ACCOUNT NO. 494127808, IT IS FOUND THAT THE ASSESSEE HAS BEEN WITHDRAWIN G FUNDS FREQUENTLY AND RE DEPOSITING THE SAME IN THE SAME BANK ACCOUNT. HENCE IN THESE CIRCUMSTANCES, IT WILL BE PROPER TO TAX THE PEAK CREDIT AND TREAT THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE. IT IS OBSERVED THAT THE ASSESSEE HAD STATED THAT THE DEPOSITS IN THE UNDISCLOSED BANK ACCOUNT WITH INDIAN BANK DURGAPUR BRANCH ARE OUT OF THE PROCEEDS OF PADDY. THE ASSESSEE HAD FILED CONFIRMATION FROM VARIOUS PARTIES WHO HAD CONFIRMED HAVING DONE PADDY BUSINESS WITH THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER APPEAL. THESE EVIDENCES WERE ALSO FILED BY THE ASSESSEE BEFORE THE LEARNED CITA WHICH WERE DISBELIEVED BY THE LEARNED CITA. BASED ON THESE EVIDENCES , IT IS CLEAR THAT THE ASSESSEE WAS INDEED CARRYING ON PADDY BUSINESS DURING THE ASSESSMENT YEAR UNDER APPEAL AND HAD KEPT THE SAME OUTSIDE THE BOOKS OF ACCOUNTS. HENCE IT WILL BE APPROPRIATE TO ADOPT THE PEAK CREDIT FOR ASSESSMENT OF UNDISCLOSED INCOME FROM THE SAID BUSINESS. THE THEORY OF PEAK CREDIT HAS BEEN GIVEN DUE CREDENCE IN THE FOLLOWING DE CISIONS: - THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS PIONEER ENGINEERING SYNDICATE 188 ITR 287 (MADRAS) ORDER DATED 2.12.1981 HAS HELD AS UNDER : - THE DEPARTMENT S CONTENTION BEFORE US IS BASED ON THE QUESTION OF LAW WHICH WE HAVE EARLIER SET OU T. THE CONTENTION IS THAT THE ASSESSEE S OFFER FOR ASSESSMENT MUST ITSELF BE REGARDED AS SUFFICIENT JUSTIFICATION FOR THE LEVY OF PENALTY. WE DO NOT AGREE WITH THIS SUBMISSION. THERE MAY BE CASES WHERE A FINDING OF CONCEALMENT MAY BE SUPPORTED BY ITA NO. 408/KOL/2015 SRI KAMALESH DUTTA A.YR. 2 010 - 11 3 THE ASSES SEE S OWN ADMISSION OF GUILT. THIS, HOWEVER, IS NOT SUCH A CASE. IT IS TRUE THAT THE ASSESSEE DID NOT PRODUCE EVIDENCE TO SUPPORT THE CASE OF THE HUNDI LOANS BEING GENUINE. IT IS ALSO TRUE THAT THE ASSESSEE WAS WILLING TO GET THE ASSESSMENT SETTLED ON THE BASIS THAT THE PEAK CREDIT IN THAT ACCOUNT REPRESENTED ITS TAXABLE INCOME. THIS OFFER OF ASSESSMENT, BY ITSELF, CANNOT, HOWEVER, AMOUNT TO AN ADMISSION THAT INCOME HAD BEEN CONCEALED. ON THE CONTRARY, EVEN THE PETITION BY THE ASSESSEE UNDER SECTION 271(4A) TO THE COMMISSIONER MADE IT QUITE CLEAR THAT THE HUNDI LOANS WERE GENUINE AND THE ASSESSEE S WILLINGNESS TO GET ASSESSED ON THE BASIS OF THE PEAK CREDIT WAS ONLY BECAUSE IT HAD BECOME DIFFICULT FOR THE ASSESSEE TO PROVE THE GENUINENESS OF THE CREDITS IN V IEW OF THE CONDITIONS CREATED BY THE DENIAL BY THE HUNDI BANKERS OF THEIR ADVANCES. HAVING REGARD TO THE TERMS OF THE ASSESSEE S SETTLEMENT PETITION TO THE COMMISSIONER WHICH FURNISHED THE ONE AND ONLY BASIS FOR THE PENALTY LEVIED BY THE INSPECTING ASSIS TANT COMMISSIONER, WE ARE SATISFIED THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PETITION, BY ITSELF, WOULD FURNISH NO EVIDENCE WHATEVER OF CONCEALMENT OF INCOME. OUR ANSWER TO THE QUESTION OF LAW PROPOUNDED BY THE DEPARTMENT IS, THEREFORE, IN THE AFFIR MATIVE AND IN FAVOUR OF THE ASSESSEE. THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS K.M.N.NAIDU 221 ITR 451 (MADRAS) HAS HELD AS UNDER : - SECTION 68, READ WITH SECTION 145, OF THE INCOME TAX ACT, 1961 CASH CREDIT ASSESSMENT YEAR 1973 - 74 WHE THER WHERE ITO REJECTED ACCOUNT BOOKS AS DEFECTIVE WHILE DETERMINING BUSINESS INCOME OF ASSESSEE, ON BASIS OF SAME ACCOUNT BOOKS IT WAS NOT REASONABLE FOR HIM TO WORK OUT PEAK CREDIT FOR MAKING ADDITION IN RESPECT OF UNEXPLAINED CASH CREDITS HELD, YES. THE DECISION OF ITAT KOLKATA IN THE CASE OF ITO VS UDAY SHANKAR MAHAWAR VIDE ITA NO.1903/KOL/2009 ORDER DATED 16.07.2010 IS REPRODUCED AS UNDER : - 4.7 I HAVE CAREFULLY CONSIDERED THE VARIOUS LEGAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. THEY ALSO SUPPORT THE CONTENTION OF THE APPELLANT THAT ONLY THE COMBINED PEAK CREDIT OF THE UNDISCLOSED BANK ACCOUNTS SHOULD BE CONSIDERED AS UNDISCLOSED INCOME. THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF NITESH R.DALWADI VIDE ITA NO.53/AHD/2013 FOR A.YR.2009 - 2 010 ORDER DATED 11.02.2014 AT PARA 6 IS REPRODUCED AS UNDER : - 6. AFTER HEARING LD. DR, WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT IN THE IMMEDIATE PRECEDING YEAR AO HAS MADE THE ADDITION BY APPLYING PEAK CREDIT THEORY IN RESPECT TO THE CASH DEP OSIT IN THE SAME BANK ACCOUNT AND THERE WAS NO CHANGE OF CIRCUMSTANCES DURING THE YEAR UNDER APPEAL, THEREFORE WE FEEL THAT LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO FOLLOW THE SAME THEORY OF PEAK CREDIT WHILE QUANTIFYING THE UNDISCLOSED INCOME OF TH E ASSESSEE. THEREFORE WE ARE NOT INCLINED TO INTERFERE WITH ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. ITA NO. 408/KOL/2015 SRI KAMALESH DUTTA A.YR. 2 010 - 11 4 THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS P.M.P. SOUNDARA PANDIYAN BROTHERS 13 TAXMAN 471 (MADRAS) HAS HELD AS UNDER : - ALTHO UGH AS MANY AS THREE QUESTIONS HAVE BEEN FRAMED, THE REAL ISSUE FOR DECISION IS WHETHER THE TRIBUNAL S FINDING THAT THE ASSESSEE HAD NOT CONCEALED ITS INCOME IN RESPECT OF CASH CREDITS CAN BE REGARDED AS A REASONABLE VIEW ON THE FACTS ON RECORD. THIS ISSU E, IN OUR JUDGMENT, IS FAIRLY PRESENTED IN THE THIRD QUESTION OF LAW BEFORE US. WE HAVE EARLIER REFERRED TO THE FACTUAL BACKGROUND TO THE CASE AS WELL AS THE CONTENT OF THE PROCEEDINGS BEFORE VARIOUS AUTHORITIES. WE HAVE ALSO REFERRED TO THE REASONING OF T HE TRIBUNAL. IT WOULD HAVE BEEN SEEN THAT THE TRIBUNAL HAD NOT WHOLLY RULED OUT THE DEPARTMENT S CASE ABOUT ASSESSEE S EFFORTS AT CONCEALMENT . ALL THEY FOUND WAS THAT IN SO FAR AS THE AMOUNTS REPRESENTING CASH CREDITS WERE CONCERNED, THERE REALLY WAS NO MATERIAL FOR THE DEPARTMENT ON THE BASIS OF WHICH IT COULD CONFIDENTLY BE SAID THAT THEY REPRESENTED THE ASSESSEE S INCOME WHICH HAD NOT SUFFERED TAX AND WHICH WAS CONCEALED IN THE GARB OF CASH CREDIT ENTRIES IN ACCOUNTS. IT IS TRUE THAT THE ASSESSEE ITSEL F HAD OFFERED THE PEAK CREDIT FOR THE PURPOSE OF ASSESSMENT. BUT IT IS NOT SUGGESTED ANYWHERE IN THE PROCEEDINGS EITHER OF THE ITO OR OF THE IAC THAT WHILE OFFERING THE PEAK CREDIT FOR THE ASSESSMENT PURPOSES, THE ASSESSEE HAD CONFESSED THAT THE CASH CREDI TS IN QUESTION REALLY REPRESENTED CONCEALED INCOME. THE RECORD DOES NOT SHOW WHAT IT WAS WHICH IMPELLED THE ASSESSEE TO SHORT CIRCUIT THE ASSESSMENT PROCESS BY OFFERING THE PEAK CREDIT FOR ASSESSMENT. WHATEVER MIGHT BE THE COMPELLING MOTIVE THERE IS NOT A SHRED OF EVIDENCE EVEN IN THE PENALTY PROCEEDINGS TO SHOW THAT ANY OF THE CREDITS WERE NOT GENUINE OR THAT THEY ARE REALLY CAMOUFLAGED OR CONCEALED INCOME OF THE ASSESSEE. NONE OF THE PERSONS IN WHOSE NAMES THE CASH CREDITS APPEAR IN THE ASSESSEE S BOOKS W ERE SHOWN TO HAVE BEEN EXAMINED BY THE ITO OR EVEN BY THE IAC FOR THE PURPOSE OF MAKING OUT A CASE AGAINST THE ASSESSEE TO THE EFFECT THAT THEY ARE NOT GENUINE LOAN TRANSACTIONS. IN THESE CIRCUMSTANCES, WE MUST ACCEPT THE ULTIMATE FINDING OF THE TRIBUNAL A S ONE BASED ON A REASONABLE VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE. OUR ANSWER TO QUESTION NO.3 IS AGAINST THE REVENUE. IT FOLLOWS THAT SIMILAR ANSWER MUST BE RETURNED FOR THE TWO OTHER QUESTIONS AS WELL. IN VIEW OF THE AFORESAID FACTS AND JUDIC IAL PRECEDENTS, THE LD. AO IS HEREBY DIRECTED TO ASSESS THE PEAK CREDIT TO BE WORKED OUT AND PUT THIS ISSUE TO REST. ACCORDINGLY, WE DEEM IT FIT AND APPROPRIATE , IN THE INTEREST OF JUSTICE AND FAIRPLAY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO BRING TO TAX THE PEAK CREDIT IN THE BANK ACCOUNT AND FRAME THE SET ASIDE ASSESSMENT AFTER DUE VERIFICATION OF THE VERACITY OF THE WORKINGS OF PEAK CREDIT FURNISHED BY THE ASSESSEE. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPORTUNIT Y OF BEING HEARD. ITA NO. 408/KOL/2015 SRI KAMALESH DUTTA A.YR. 2 010 - 11 5 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN TH E COURT ON 2 1.09.2015. SD/ - SD/ - [MAHAVIR SINGH] [M.BALAG ANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21.09.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO : 1 . SRI KAMALESH DUTTA, C/O V.N.PUROHIT & CO., CHARTERED ACCOUNTANTS, DIAMOND CHAMBERS, UNIT - III, 4THF FLOOR, SUIT NO.4G, 4, CHOWRINGHEE LANE, KOLKATA - 700016. 2 THE A.C.I.T., CI RCLE - 1, DURGAPUR. 3 . THE CIT - DURGAPUR. 4. THE CIT(A) - DURGAPUR. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES