The ITO, Ward-5(3), Baroda V. M/s. K.G. Jewellers, Baroda

ITA 450/AHD/2009

• Counselvise Citation: 45020514 RSA 2009
• Duration Of Justice: 2 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 11-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Gift; Principle of natural justice; Peak credit; Question of law; Corroborative evidences; Retraction
• Section: 142(1); 133A; 131; 68

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI BHAVNESH SAINI - JM AND SHRI B P JAIN - AM ITA NO.450/AHD/2009 WITH C O NO.51/AHD/2009 (ASSESSMENT YEAR:-2001-02) ITA NO.1802/AHD/2009 (ASSESSMENT YEAR:-2001-02) THE INCOME-TAX OFFICER, WARD-5(3), AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA V/S M/S K G JEWELLERS, M G ROAD, CHOKSHI BAZAR, BARODA PAN: AABFK 8877 E [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI B L YADAV, DR ASSESSEE BY:- SHRI S N SOPARKAR, AR DATE OF HEARING:- 22-12-2011 DATE OF PRONOUNCEMENT:- 30-12-2011 O R D E R PER B P JAIN (AM) :- THESE TWO APPEALS OF THE REVENUE ARISE FROM TWO DIFFERENT ORDERS OF THE LEARNED CIT(A)-V, BARODA FOR THE ASSESSMENT YEAR 2001-02, DATED 12-11-2008 IN TH E QUANTUM APPEAL AND DATED 13-03-2009 IN THE PENALTY APPEAL U /S 271(1)(C) OF THE ACT. THE ASSESSEE HAS ALSO FILED CROSS OBJE CTION IN THE QUANTUM APPEAL OF THE REVENUE. 2 FIRST OF ALL, WE TAKE UP THE QUANTUM APPEAL OF TH E REVENUE. THE REVENUE AND THE ASSESSEE IN ITS CROSS OBJECTION HAVE RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2 ITA NO.450/AHD/2009 [REVENUES APPEAL] :- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE FOLLOWING ADDITION S: A) RS.3,67,203/- MADE ON ACCOUNT OF DIFFERENCE IN V ALUATION OF CLOSING STOCK. B) RS.19,52,810/- MADE ON ACCOUNT OF EXCESS STOCK F OUND DURING THE SURVEY. C) RS.93,500/- MADE ON ACCOUNT OF UNAPPROVED AND UN EXPLAINED CASH CREDIT (RESTRICTED THE ADDITION TO THE EXTENT OF RS.55,0007- AS AGAINST RS.1,48,500/- 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. OIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE DEPARTMENT HAS BROUGHT ON RECORD SUFFICIENT MATERIA L TO SUPPORT THE ADDITIONS. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)ERRED IN NOT APPRECIATING THE FACT THAT T HE ASSESSEE HAS DELIBERATELY RETRACTED THE DISCLOSURE MADE DURI NG THE COURSE OF SURVEY AND THEREBY REDUCED ITS PROFIT TO DEFRAUD THE REVENUE. 4 THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL I THE ORDER OF THE ID. CIT(A) MAY BE SET-ASIDE TO THE ABOVE EXTENT AND THAT OF THE A.O. BE RESTORED. C O NO.51/AHD/2009 [BY ASSESSEE] :- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF CASH CREDITS TO THE EXTENT OF RS.55,000 /- BY TAKING PEAK CASH FROM THE CHART SUBMITTED. THE LEARNED CIT (A) HAS NOT APPRECIATED THE FACT THAT THE APPELLANT SUBMITTED C ONFIRMATIONS OF ALL THE DEPOSITORS AND PRODUCED 3 DEPOSITORS BEF ORE AO WHO CONFIRMED HAVING ADVANCED THE AMOUNTS TO THE APPELL ANT. THIS 3 ACTION OF THE CIT(A) IS BAD, ILLEGAL AND AGAINST TH E PRINCIPLES OF NATURAL JUSTICE AND THEREFORE REQUIRES TO BE QUASHE D. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, EDIT, DE LETE, CHANGE OR MODIFY ALL OR ANY OF THE GROUND BEFORE OR AT THE TIME OF HEARING. 3 AS REGARDS GROUND NO.1(A) OF THE REVENUES APPEAL , THE BRIEF FACTS ARE THAT THE ASSESSEE HAS VALUED CLOSIN G STOCK OF GOLD AND SILVER AS PER RATES OF LAST PURCHASE FOR THE YE AR AND APPLIED THE SAME TO THE QUANTITY OF STOCK AT THE RELEVANT Y EAR END. THE AO OBSERVED THAT THE ASSESSEE SHOULD HAVE VALUED TH E STOCK AT ACTUAL COST BASED ON FIFO METHOD. THE AO ACCORDINGL Y WORKED OUT UNDERVALUATION AT RS.3,67,203/- AND ADDED TO TH E INCOME OF THE ASSESSEE. 4 THE LEARNED CIT(A) ACCEPTED THE EXPLANATION OF TH E ASSESSEE WITH REGARD TO THE VALUATION AT THE RATE O F LAST PURCHASE OF THE YEAR AND FURTHER EXPLANATION THAT THE CLOSIN G STOCK DURING THE IMPUGNED YEAR BECOME THE OPENING STOCK IN THE F OLLOWING YEAR AND ACCORDINGLY DELETED THE ADDITION MADE BY T HE AO. 5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. THE ASSESSEE HAS ADMITTED THE METHOD O F VALUATION OF CLOSING STOCK AS LAST PURCHASE OF THE YEAR WHICH IN FACT TANTAMOUNT ONE AND SAME THING I.E. FIFO METHOD. THE REFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A ) ESPECIALLY WHEN THERE IS NOTHING ON RECORD WITH REGARD TO THE CHANGE IN METHOD OF ACCOUNTING BY THE ASSESSEE. IN THE CIRCUM STANCES AND FACTS OF THE CASE, WE DISMISS GROUND NO.1(A) OF THE REVENUES APPEAL. 4 6 AS REGARDS GROUND NO.1(B), THE FACTS ARE THAT SUR VEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT ON 9-11-2000 DU RING WHICH THE VALUE OF EXCESS STOCK FOUND AMOUNTING TO RS.19, 52,810/- WAS ACCEPTED BY ONE OF THE PARTNERS AS UNDISCLOSED INCO ME. THEREAFTER, THE PARTNER RETRACTED FROM THE STATEMEN T BY WAY OF FILING A DETAILED AFFIDAVIT. IN THE ORIGINAL ASSESS MENT PROCEEDINGS, THE A.O. MADE THE SAID ADDITION. THE ITAT, AHMEDABA D IN TURN, SET ASIDE THE MATTER FOR PROPER EXAMINATION BY THE A.O. IN THE SET ASIDE ASSESSMENT ALSO, THE A0 HELD THAT THE ASSESSE E FAILED TO JUSTIFY THE RETRACTION AND THAT THE ASSESSEE DID NO T CROSS VERIFY THE TRANSACTIONS AND HENCE PROCEEDED TO ADD RS.19,5 2,810/- BY WAY OF UNDISCLOSED STOCK FOUND DURING SURVEY BUT NO T DECLARED FULLY IN THE RETURN OF INCOME. 7 THE LEARNED CIT(A) DELETED THE ADDITION FOR THE R EASON THAT THERE IS NO REAL DIFFERENCE IN THE STOCK ON THE DAT E OF SURVEY INASMUCH AS THE GOODS FROM SEVERAL SUPPLIERS WERE R ECEIVED BUT THE RESPECTIVE BILLS WERE RECEIVED LATER AFTER SURV EY. THE FACT OF SUPPLY OF GOODS AND THE TRANSACTIONS HAVE BEEN CONF IRMED BY THE SUPPLIERS. THE ASSESSEE HAS SUBMITTED A DETAILED RE CONCILIATION STATEMENT. IF THE SAME IS TAKEN INTO CONSIDERATION, THERE IS NO DIFFERENCE IN STOCK. THE THEORY OF THE AO THAT THE EXPLANATION IS AN AFTER-THOUGHT OR A STORY CONCOCTED BY THE ASSESS EE TO SUIT HIS PURPOSE OF EXPLAINING THE DIFFERENCE WAS NOT ACCEPT ED. IN THE CONFIRMATORY STATEMENTS GIVEN BY THE SUPPLIERS, NON E OF THEM HAS STATED THAT THEY DELIVERED BILLS PRIOR TO THE DATE OF SURVEY. ON THE CONTRARY, THEY HAVE STATED THAT THE DELIVERY WAS GI VEN AND BILLS 5 WERE SUBMITTED LATER ON. THE ADMISSION ITSELF WAS U NDER DURESS AND THEREFORE THE ASSESSEE HAD TO STATE IN THE STAT EMENT THAT NO BILLS WERE PENDING. HOW THE ASSESSEE WAS UNDER PRES SURE DURING THE SURVEY HAS BEEN STATED IN THE AFFIDAVIT. THE AC TUAL DIFFERENCE IN THE STOCK HAS ALREADY BEEN OFFERED TO TAX IN THE RETURN OF INCOME. THE LEARNED CIT(A) OBSERVED THAT THE ASSESS EE HAD SUFFICIENTLY AND REASONABLY EXPLAINED THE DIFFERENC E IN THE STOCK AND ACCORDINGLY DELETED THE ADDITION MADE BY THE AO . 8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LEARNE D CIT(A) AND VARIOUS DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE PAPER BOOK PLACED BEFORE US BY MR. S N SOPARKAR, LEARNED COUNSEL FOR THE ASSESSEE THAT THERE IS NO REAL DIFFERENCE IN TH E STOCK ON THE DATE OF SURVEY AND IN VIEW OF VARIOUS CONFIRMATORY STATEMENTS GIVEN BY THE SUPPLIERS WHICH HAVE BEEN PLACED ON RE CORD AND HAVE BEEN PERUSED BY US DURING THE COURSE OF HEARIN G. THE RETRACTION HAS BEEN MADE BY THE ASSESSEE UNDER DURE SS HAS BEEN STATED IN THE AFFIDAVIT THOUGH WHATEVER HAS BEEN AD MITTED DURING THE COURSE OF SURVEY HAS BEEN RETRACTED BY THE ASSE SSEE BY AFFIDAVIT AND THE SAME HAS BEEN CORROBORATED THAT T HE BOOKS OF ACCOUNT DO NOT DISCLOSE AS STATED DURING THE COURSE OF SURVEY IN THE STATEMENTS MADE UNDER DURESS. THIS PROPOSITION HAS BEEN APPROVED BY THE HON'BLE SUPREME COURT IN THE CASE O F PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF KERALA AND ANO THER [1973] 91 ITR 18 (SC), WHERE IT HAS BEEN HELD THAT SUCH AD MISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE ASSESSEE WHO MA DE THE 6 ADMISSION TO SHOW THAT IT IS INCORRECT AND THE ASSE SSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS O F ACCOUNT DO NOT DISCLOSE THE CORRECT STATE OF FACTS. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE FIND NO INF IRMITY IN THE ORDER OF THE LEARNED CIT(A) WHO HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. THUS, GROUND NO.1(B) OF THE REVENU ES APPEAL IS DISMISSED. 9 AS REGARDS GROUND NO.1(C) OF THE REVENUES APPEAL AND SOLITARY GROUND OF THE ASSESSEE IN CROSS OBJECTION, THE FACTS AS EMANATING FROM THE ORDER OF THE AO VIDE PARAS 5.1 T O 5.7 ARE AS UNDER:- DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDIN GS, IT WAS FOUND THAT THE ASSESSEE ACCEPTED CASH DEPOSITS FROM 11 DEPOSITORS & REPAID THE SAME IN CASH DURING THE YEA R. THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATION, THEIR P AN & DETAILS OF I. T. RETURNS. ONLY CONFIRMATIONS FROM D EPOSITORS WERE SUBMITTED BUT NO DETAILS & EXPLANATION REGARDI NG SOURCE OF THE DEPOSITORS WERE SUBMITTED. NAME & AMO UNT WISE DETAILS OF DEPOSITORS ARE REPRODUCED AS UNDER: - THE SO-CALLED DEPOSITORS ARE AS UNDER: SR. NO. NAME AMOUNT 1. MEMON SIDDIQ SATTAR RS.15,000/- 2. MEMON SAF I SUMERBHAI ' RS. 2,500/- 3. , . MIRJA AYUB A. RS.17,000/- 4. NASHRUMA IBRAHIM RS.15,000/- 7 5. MEMON ISMAIL NOORMOHAMMED RS.17,000/- 6. MEMON NOORMOHAMMED GAFFARBHAI RS.15,000/- 7. PATEL YAKOOB ISMAIL RS.15,000/- 8. SALIM A. MALEK RS.15,000/- 9. KHILJI AYUBBHAI IBRAHIM RS. 7,000/- 10. MIRAJ A. PATEL RS.15,000/- 11. A. HAMID PATEL RS.15,000/- DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S, THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE DEPOSIT S & CREDITWORTHINESS OF THE DEPOSITORS. AFTER J CONSIDE RING THE ENTIRE FACTS ADDITION OF RS.1,48,500/- WAS MADE TO THE RETURNED INCOME OF THE ASSESSEE. BY THE THEN ASSESS ING OFFICER THE ABOVE ISSUE WAS DEALT AS UNDER. 5.2. DURING THE COURSE OF ORIGINAL PROCEEDINGS VARI OUS DETAILS WERE CALLED FOR FROM THE ASSESSEE AND IT WA S ASKED TO APPEAR WITH BOOKS OF ACCOUNTS. IT WAS NOTICED THE A SSESSEE ACCEPTED CASH DEPOSITS AND PAID THE SAME IN CASH DU RING THE YEAR. THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATIO NS FROM THE ABOVE DEPOSITORS ALONG WITH THEIR PAN, DETAILS OF RETURN FILED AND TO PROVE THEIR SOURCE OF INCOME WITH PROO F. THE ASSESSEE SUBMITTED CONFIRMATIONS FROM DEPOSITORS BU T NO DETAILS AND EXPLANATIONS REGARDING SOURCE OF THE DE POSITORS WAS SUBMITTED. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF SOURCE OF INCOME OF THE SAID DEPOSITORS AND INFORMED THAT IN CASE OF FAILURE ADVERSE VIEW WILL BE TAKEN. 5.3 IT WAS SEEN THAT ALL PERSONS WERE NOT ASSESSED TO INCOME-TAX. THE ASSESSEE THAT THERE IS ONUS ON THE ASSESSEE TO PROVE IDENTITY AND CREDITWORTHINESS OF THE DEPOS ITORS AND THAT FULL NAME AND ADDRESS OF THE PERSONS HAVE BEEN PROVIDED. IT IS FURTHER STATED THAT LOAN TAKEN FROM EACH 8 PERSON WAS OF VERY NOMINAL AMOUNT WHICH WAS GIVEN B Y THEM FROM THEIR SAVINGS ACCOUNT. ASSESSEE'S ARGUMEN TS WERE NOT ACCEPTED. THE ASSESSEE HAS FAILED TO PROVE THE CAPACITY AND CREDITWORTHINESS OF THE DEPOSITORS AS WELL AS S OURCE OF THE SAID DEPOSITS. OUT OF THE 11 DEPOSITOR 5, SOME HAVE SHOWN THE SOURCE OF INCOME FROM SERVICE BUT NO PROO F FOR THE SAME HE S BEEN SUBMITTED. IN NOT A SINGLE CASE COPY OF BANK ACCOUNT OF THE DEPOSITOR HAS BEEN FURNISHED BA SED ON WHICH CAPACITY AND CREDITWORTHINESS OF THE DEPOSITO R COULD HAVE BEEN VERIFIED. IN VIEW OF THE ABOVE DISCUSSION , IT WAS TREATED THAT THE ASSESSEE HAD INTRODUCED UNEXPLAINE D CASH IN ITS BOOKS OF ACCOUNTS IN THE NAME OF THE SAID PERSO NS AND HENCE THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN THE ORIGINAL ASSESSMENT WHICH WORKS OUT TO RS.1,48,500/- AS PER THE DETAILS GIVEN ABOVE. 5.4. APPEAL AGAINST THE ADDITION OF RS.1,48,500/- W AS FILED BY THE ASSESSEE BEFORE THE ID. CIT(A). APPEAL OF TH E ASSESSEE WAS DISMISSED. THE HON. ITAT VIDE-ITS ORDE R SET- ASIDE THE ISSUE AND DIRECTED TO DECIDE THE SAME AFT ER PROVIDING OPPORTUNITY OF HEARING. OPPORTUNITY OF HE ARING WAS PROVIDED TO THE ASSESSEE AND ON THIS ISSUE THE ASSESSEE FILED REPLY DATED NOVEMBER 27, 2007. THE RELEVANT) EXTRACT IS REPRODUCED HERE UNDER: '3) UNEXPLAINED CASH CREDIT OF RS.1,48,500/-:- WE ENCLOSE HEREWITH THE COPIES OF CONFIRMATION LETT ERS OF THE DEPOSITORS AS MENTIONED BELOW:- (A) A. HAMID PATEL RS.15,000/- (B) SHIRAJ A PATEL RS.15,000/- (C) KHILJI AYUBBHM IBRAHIM RS.7,000/- (D) MIRJA AYUB A RS.17,000/- (E) NASHRUMA IBRAHIM RS.15,000/- (F) MEMON SIDDIQ SATTAR RS.15,000/- (G) MEMON SAFI SUMERBHAI RS. 2,500/- (H) MEMON ISMAIL NOORMOHAMMAD RS.17,000/- (I) MEMON NOORMOHAMMAD GAFFARBHAIRS.15,000/- (J) YAKUB ISMAIL PATEL RS.15,000/- (K) SALIM A MALEK RS.15,000/- 9 THE CONFIRMATION LETTERS OF THE DEPOSITORS MENTION ABOUT THE NAME, ADDRESS AND SOURCE FROM WHERE THE DEPOSITOR H AS DEPOSITED THE AMOUNT WITH ASSESSEE FIRM. 5.5. ON VERIFICATION OF THE SUBMISSIONS IT WAS FOUN D THAT CONFIRMATION LETTERS WERE NOTHING BUT A ZEROX COPIE S OF EARLIER CONFIRMATIONS WHICH WERE SUBMITTED BY THE A SSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. 5.6. OUT OF 11 DEPOSITORS, ONLY 3 DEPOSITORS DETAIL S OF WHICH GIVEN BELOW WERE PRODUCED FOR VERIFICATION ON 29/11/2007: 1. SHRI ISMAILBHAI NOORMOHAMED MEMON, RS.17,000/- 2. SHRI SIDDIKBHAI SATTARBHAI MEMON, . RS.15,000 /- 3. SHRI YAKUB ISMAIL PATEL, RS.15,000/- STATEMENT U/S 131 OF THE ACT WAS RECORDED ON 29/11/ 2007 OF THE ABOVE NAMED DEPOSITORS. IN THEIR STATEMENT THEY HAVE BEEN GIVEN LOAN TO SHRI IQBALBHAI MEMON PARTNER OF THE FIRM. 1. IN HIS STATEMENT SHRI SIDDIKBHAI SATTARBHAI MEMO N HAS STATED THAT HIS ANNUAL INCOME WAS RS.50,000/- T O RS.60,000/- IN HIS FAMILY THERE WERE 7 PERSONS & ANNUAL HOUSE-HOLD EXPENSES WAS RS.40,000/-. ONE CAN NOT PULL ON HIS FAMILY OF 7 PERSONS WITH HH EXPENSE S OF RS.40,000/- P. A. CONSIDERING THE SIZE OF FAMILY & YEARLY EARNING & EXPENSES, ONE CAN NOT SPARE TO LOA N ANY BODY. THE CREDIT WORTHINESS, THUS DOES NOT PROV ED. 2. IN HIS STATEMENT SHRI ISMAILBHAI NOORMOHAMED MEMON HAS STATED THAT HE WAS RICKSHAW DRIVER EARNIN G RS.150/- TO RS.170/- PER DAY. IN HIS FAMILY THERE W ERE 4 PERSONS & ANNUAL HOUSE-HOLD EXPENSES WAS RS.35,000/- TO RS.40,000/-. ONE CAN NOT PULL ON HIS FAMILY OF 4 PERSONS WITH HH EXPENSES OF RS.35,000/- TO RS.40,000/- P.A. CONSIDERING THE SIZE OF FAMILY & YEARLY EARNING (RS.48,000) & EXPENSES, ONE CAN NOT 10 SPARE TO LOAN ANYONE. THE CREDIT WORTHINESS THUS DO ES NOT PROVED. 3. IN HIS STATEMENT SHRI YAKUB ISMAILBHAI PATEL STA TED THAT HE WAS WORKING AS SEVAK IN MOSQUE AND IN RECEIPT OF GIFT FROM VARIOUS PERSONS DURING FESTIVA L DAYS. IN HIS FAMILY THERE WERE 6 PERSONS & ANNUAL HOUSE-HOLD EXPENSES WAS NOT FIXED AS THERE WAS FREE ACCOMMODATION AND FOOD FACILITY. HE ACCEPTED THAT LOAN WAS GIVEN TO SHRI IKBALBHAI. HOWEVER, NO SUPPORTING EVIDENCES, ETC. WERE PRODUCED. THE CREDI T WORTHINESS THUS DOES NOT PROVED. HOWEVER, REMAINING DEPOSITORS WERE NOT PRODUCED FOR VERIFICATION. VIDE NOTICE U/S 142(1) OF THE ACT & S HOW CAUSE DATED 30/11/2007, ASSESSEE WAS REQUESTED TO_P RODUCE REMAINING DEPOSITORS FOR VERIFICATION ON OR BEFORE 03-30 PM OF 07/27/2007. IN REPLY TO IT IT WAS STATED BY THE ASSESSEE THAT IT HAD ALREADY PRODUCED 3 DEPOSITORS WHERE AS ONE DEPOSITOR NAMELY SAFI SUMERBHAI MEMON WAS DIED & HE NCE IT IS NOT POSSIBLE FOR THE ASSESSEE TO PRODUCE HIM. HOWEVER, NO ANY DEATH CERTIFICATE OR SUPPORTING EVIDENCE WAS PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CONTENTI ON. AS REGARDS REMAINING 7 DEPOSITORS, IT WAS SPECIFICALLY EXPLAINED BY THE ASSESSEE THAT THEY ARE NOT TRACEAB LE AT THE ADDRESSES AVAILABLE WITH THE ASSESSEE FIRM. 5.7. FROM THE ABOVE STATED FACTS, IT CAN BE SEEN TH AT ASSESSEE FAILED TO PROVE GENUINENESS OF DEPOSITS & CREDITWORTHINESS OF THE THREE DEPOSITORS WHICH WERE PRODUCED FOR VERIFICATION. ALL THE THREE DEPOSITORS PRODUCED FOR VERIFICATION WERE FOUND VERY SMALL MEN HAVING B IG FAMILY. THE EARNING WAS VERY SMALL FROM WHICH ONE C AN HARDLY SAVE ANY MONEY TO ADVANCE LOAN. NO ANY DEATH CERTIFICATE OR SUPPORTING EVIDENCE WAS PRODUCED BY THE ASSESSEE IN RESPECT OF 4 DEPOSITOR. IN RESPECT OF R EMAINING 7 DEPOSITORS, IT IS TO BE STATED THAT THE ASSESSEE FA ILED TO PRODUCE THE SAID DEPOSITORS FOR VERIFICATION. NO FR ESH EVIDENCES LIKE FRESH CONFIRMATIONS, COPIES OF THEIR BANK ACCOUNTS, PAN DETAILS ETC. WERE FILED BY THE ASSESS EE FOR THESE DEPOSITORS. UNDER THE I T ACT, ADDITION ON AC COUNT OF 11 UNEXPLAINED CASH CREDITS HAS BEEN GIVEN, STATUTORY RECOGNITION UNDER SECTION 68. WHERE A SUM HAS BEEN FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR A PREVIOUS YEAR AND THE ASS ESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCES OF THAT SUM, ON THE EXPLANATION OFFERED BY HIM IS, IN THE O PINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. THEN THE S UM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME FOR THE ASSESSEE OF THE PREVIOUS YEAR. IT IS A WELL SETTLED LAW AND HELD IN UMPTEEN NUMBERS OF JUDICIAL PRONOUNCEMENTS IT IS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA-FACIE IDE NTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO AD VANCE SUCH MONEY AND GENUINENESS OF THE TRANSACTION. IN THIS C ONTEXT, RELIANCE IS PLACED ON THE DECISION OF HON. SUPREME COURT IN THE CASE OF ROSHAN DI. HATTI VS CIT 107 ITR 938 (SC ) AND KALE KHAN MOHAMMAD HANIF VS CIT 50 ITR 1 (SC). HOWEVER, THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVING THE GENUINENESS OF THE CASH CREDITS. AS REG ARDS BENEFIT OF PEAK CREDIT, IT IS TO BE STATED THAT AS THE ENTIRE AMOUNT OF CASH CREDIT IS CONSIDERED NON-GENUINE, TH EREFORE, THE SAME IS NOT CONSIDERED. UNDER THE CIRCUMSTANCES, I HAVE NO OTHER ALTERNATIV E BUT TO ENDORSE THE FINDINGS OF THE ASSESSING OFFICER WHICH HE MADE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. IN VIEW OF THE ABOVE DISCUSSION, IT IS TREATED THAT TH E ASSESSEE HAS INTRODUCED UNEXPLAINED CASH IN ITS BOOKS OF ACC OUNT IN THE NAME OF ABOVE SAID PERSONS & THEREFORE THE SAID AMOUNT OF RS.1,48,500/- IS ADDED TO THE RETURNED INCOME OF THE ASSESSEE. I AM SATISFIED THAT THE ASSESSEE HAS FURN ISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED PART ICULARS OF INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) ARE IN ITIATED BY ISSUE OF NOTICE U/S.274 READ WITH SECTION 271 OF THE I. T. ACT. 10 THE LEARNED CIT(A) VIDE PARA 6.2 OF HIS ORDER OB SERVED THAT THE THREE DEPOSITORS HAVE CONFIRMED THE DEPOSITS AN D CONSIDERING SMALLNESS OF THE AMOUNTS INVOLVED TOTALING TO RS.47 ,000/- WERE CONSIDERED TO BE EXPLAINED AND ACCORDINGLY DELETED THE ADDITION. 12 11 THE LEARNED CIT(A) OBSERVED THAT IT IS ONLY THE PEAK THEREOF WHICH CAN BE ADDED FOR THE BALANCE ADDITION WHICH C OMES TO RS.55,000/- AND THEREFORE RESTRICTED THE TOTAL ADDI TION TO RS.55,000/- ONLY. 12 THE LEARNED DR MR. B L YADAV ARGUED THAT THE ASS ESSEE HAS NOT ADMITTED THE BALANCE OF 8 CREDITORS AS NON GENU INE BEFORE ANY OF THE AUTHORITIES BELOW AND IF IT IS SO, THE LEARN ED CIT(A) IS NOT JUSTIFIED IN GRANTING THE BENEFIT OF PEAK THEORY. H E FURTHER SUPPORTED THE ORDER OF THE AO WITH REGARD TO THE DE LETION OF THE ADDITION OF RS.47,000/- BY THE LEARNED CIT(A). 13 ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE, SHRI S N SOPARKAR, ADVOCATE ARGUED THAT THOUGH 8 CR EDITORS HAVE NOT BEEN CONSIDERED AS NON GENUINE BY THE ASSESSEE BEFORE ANY OF THE AUTHORITIES BELOW, STILL THE ASSESSEE CAN BE GR ANTED THE BENEFIT OF PEAK THEORY. HE FURTHER MADE ARGUMENTS THAT ALL THE CREDITORS ARE GENUINE FOR WHICH THE ASSESSEE HAD SUBMITTED TH E CONFIRMATIONS AND THE SAME ARE SMALL CREDITORS. 14 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE THREE DEPOSITS TOTALING TO RS.47,000/-, THEY WERE EXAMINED BY ISSUE OF SUMMONS U/S 131 BY T HE AO IN THE SET-ASIDE PROCEEDINGS WHO HAVE CONFIRMED OF HAV ING GIVEN THE LOANS TO THE ASSESSEE. ON PERUSAL OF THE FACTS ON RECORD, WE ARE OF THE VIEW THAT THE SAID THREE CASH CREDITORS WHO HAVE ATTENDED BEFORE THE AO AND HAVE CONFIRMED OF HAVING GIVEN LOANS TO THE ASSESSEE, CANNOT BE DOUBTED AND THEREFORE WE FIND NO 13 INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) TO THA T EXTENT IN DELETING THE ADDITION MADE BY THE AO. 15 AS REGARDS APPLICATION OF PEAK THEORY FOR REST O F THE CREDITORS TOTALING TO RS.1,01,500/-, THE ARGUMENTS MADE BY SHRI S N SOPARKAR, LEARNED COUNSEL FOR THE ASSESSEE CANNOT BE ACCEPTED THAT ALL THE CREDITORS ARE GENUINE AND SMALL CREDIT ORS AND THE ASSESSEE HAVING SUBMITTED THE CONFIRMATIONS, THE LE ARNED CIT(A) HAS RIGHTLY APPLIED THE PEAK CREDIT. NO AUTHORITY H AS BEEN CITED BY MR. S N SOPARKAR IN THIS REGARD. 16 WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE LEARNED DR SHRI B L YADAV THAT THE ASSESSEE HAS NOT ACCEPTE D THE CREDITORS AS NON GENUINE AND THEREFORE THE ASSESSEE CANNOT BE GIVEN THE BENEFIT OF PEAK CREDIT. THIS VIEW FINDS S UPPORT FROM THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VIJAY AGRICULTURAL INDUSTRIES [2007] 294 ITR 61 0 (ALL). FOR THE SAKE OF CLARITY, THE SAID DECISION IS REPRODUCE D AS UNDER:- R K AGRAWAL J. - THE INCOME-TAX APPELLATE TRIBUNAL , ALLAHABAD, HAS REFERRED THE FOLLOWING QUESTION OF LAW UNDER SE CTION 256(1) OF THE INCOME-TAX ACT, 1961, (HEREINAFTER REFERRED TO AS ' THE ACT'), FOR OPINION OF THIS COURT: WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS LEGALLY CORRECT I N HOLDING THAT ONLY THE AMOUNT OF PEAK CREDIT SHOULD BE ADDED AS UNEXPLAINED CASH CREDIT SECTION 68 OF THE INCOME-TA X ACT, 1961 ?'. THE REFERENCE RELATES TO THE ASSESSMENT YEAR 1979-8 0. 14 BRIEFLY STATED, THE FACTS GIVING RISE TO THE PRESEN T REFERENCE ARE AS FOLLOWS: THE RESPONDENT IS BEING ASSESSED TO INCOME-TAX IN T HE STATUS OF A REGISTERED FIRM. IT IS ENGAGED IN THE MANUFACTURE A ND SALE OF AGRICULTURAL IMPLEMENTS AND IRON SCRAP, ETC. FOR TH E ASSESSMENT YEAR IN QUESTION, THE ASSESSING OFFICER HAD NOTICED CERTAIN CASH CREDITS IN THE SQUARED UP ACCOUNTS. HE REQUIRED THE ASSESSEE-RESPO NDENT TO PROVE THE GENUINENESS OF THE DEPOSITS WHEREUPON THE RESPONDEN T FILED ONLY CONFIRMATORY LETTERS AND DID NOT PRODUCE ANY OTHER EVIDENCE IN SUPPORT OF THE CASH CREDITS. IT MAY BE MENTIONED HERE THAT THE ASSESSING OFFICER HAD NOTICED THE FOLLOWING CASH CREDITS IN T HE SQUARED UP ACCOUNTS OF THE VARIOUS PERSONS: RS. S/SRI PARAS RAM NUMBERDAR 5,000 S/SRI BHAGWAN DAS 2,200 S/SRI AMIT DEO 1,500 M/S. MAHESH CHANDRA KESHAV CHAND 7,000 SRI MAHESH CHANDRA MISTRY 2,000 SRI MAHESH CHANDRA JAIN 3,600 SRI PRAYAG DAS AGRAWAL 1,800 M/S. AGRAWAL BARTAN BHANDAR 2,000 SRI DIN DAYAL 1,500 SRI HALKE 1,200 SRI SAUKAT 2,000 SRI SIRAJUDDIN 2,000 SRI LATIF MOHD 4,500 SRI MAQBOOL 2,500 SRI HUSSAIN MOHD. 2,500 SRI MIANUIDDIN 2,500 SRI SALIM MOHD. 2,500 HE CONSIDERED THE EXPLANATION/CONFIRMATORY LETTERS AND TREATED FOLLOWING AMOUNTS TOTALING RS.23,200 AS UNEXPLAINED DEPOSITS LIABLE TO BE TREATED AS INCOME FROM UNEXPLAINED SOURCES UNDER SECTION 68 OF THE OF THE ACT. RS. 1. PARAS RAM NUMBERDAR 2,000 2. BHAGWAN DAS 2,200 3. MAHESH CHANDRA JAIN 2,000 4. MAHESH CHANDRA MISTRI 2,000 15 5. PRAYAGDAS AGRAWAL 1,800 6. DIN DAYAL 1,500 7. SAUKAT 2,000 8. SIRAJUDDIN 2,000 9. HALKE 1,200 10.HUSSAIN MOHD 2,500 11.MUNIUDDIN 2,500 12.AMITDEO 1,500 -------- 23,200 IT MAY BE MENTIONED HERE THAT IN RESPECT OF SRI PAR AS RAM NUM HE HAS MADE AN ADDITION OF RS.2,000 TREATING THE SAID AMOU NT TO BE PEAK CREDIT. IN RESPECT OF MAHESH CHANDRA JAIN, THE ADDI TION WAS RS.2,000 BEING PEAK CREDIT. FEELING AGGRIEVED, THE RESPONDEN T PREFERRED APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER WHO HAS UPHELD THE ADDITIONS. STILL FEELING AGGRIEVED, THE RESPONDENT PREFERRED A SECOND APPEAL BEFORE THE TRIBUNAL. BEFORE THE TRIBUNAL, TH E RESPONDENT HAD FILED AN APPLICATION SEEKING PERMISSION TO RAISE TH E FOLLOWING AS ADDITIONAL GROUND OF APPEAL: 'THAT IN VIEW OF THE MATTER ONLY THE PEAK CREDITS W HICH WORKS TO RS.7,200 ONLY SHOULD HAVE BEEN CONSIDERED FOR ADDIT ION UNDER SECTION 68 AND NOT RS.22,300 AS ADDED BY THE INCOME -TAX OFFICER FIRMED BY THE APPELLATE ASSISTANT COMMISSIO NER.' BEFORE THE TRIBUNAL, THERE WAS A DIFFERENCE OF OPIN ION BETWEEN THE TWO MEMBERS AND THE MATTER WAS REFERRED TO THE THIRD ME MBER FOR HIS OPINION. THE JUDICIAL MEMBER WAS OF THE VIEW THAT T HE PEAK CREDIT SHOULD BE DETERMINED BY THE INCOME-TAX OFFICER AND ONLY THE AMOUNT OF PEAK CREDIT BE ADDED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HOWEVER, THE ACCOUNTANT MEMBER WAS OF THE OPINION THAT ALL THE SUMS CREDITED FOR WHICH THERE WAS NO SATISFACTO RY EXPLANATION BY THE RESPONDENT-ASSESSEE, REQUIRED TO BE ADDED UNDER THE SAID SECTION. THE THIRD MEMBER, VIDE ORDER JANUARY 10, 1989, HAS EXPRESSED HIS AGREEMENT WITH THE JUDICIAL MEMBER. IN CONFORMITY W ITH THE ORDER PASSED BY THE THIRD MEMBER, THE TRIBUNAL PARTLY ALL OWED THE APPEAL FILED BY THE RESPONDENT THAT THE PEAK CREDIT SHOULD BE DETERMINED BY THE ASSESSING OFFICER AND ONLY THE AMOUNT OF PEAK C REDIT SHOULD BE ADDED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 O F THE ACT. 16 WE HAVE HEARD SRI SHAMBHOO CHOPRA, LEARNED STANDING COUNSEL FOR THE REVENUE. NOBODY HAS APPEARED ON BEHALF OF THE R ESPONDENT- ASSESSEE. WE FIND THAT IN RESPECT OF THE SQUARED UP ACCOUNTS OF THE TWO DEPOSITORS, MENTIONED ABOVE, THE ASSESSING OFFICER HIMSELF HAD TAKEN THE PEAK CREDIT AS UNEXPLAINED DEPOSIT AND ADDED TH E SAME UNDER SECTION 68 OF THE ACT. SO FAR AS THE REMAINING DEPOSITS ARE CONCERNED, THE RE WAS NO TRANSACTION BETWEEN THE DEPOSITORS AND THE RESPONDE NT-ASSESSEE. THIS COURT IN INCOME-TAX REFERENCE NO. 226 OF 1998, BHAI YALAL SHYAM BEHARI V. CIT 5] 276 ITR 38 DECIDED ON JANUARY 19, 2005, HAS HELD THAT THE PRINCIPLE OF PEAK CREDIT IS NOT APPLICABLE IN CASE WHERE THE DEPOSITS REMAINED UNEXPLAINED UNDER SECTION 68 OF T HE ACT. IT CANNOT APPLY IN A CASE OF DIFFERENT DEPOSITORS WHERE THERE HAS BEEN NO TRANSACTION OF DEPOSITS AND ITS REPAYMENT BETWEEN A PARTICULAR DEPOSITOR AND THE ASSESSEE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE A RE OF THE CONSIDERED THAT THE TRIBUNAL WAS NOT JUSTIFIED IN D IRECTING THE ASSESSING OFFICER TO TAKE THE PEAK CREDIT FOR THE P URPOSES OF SECTION 68 OF THE ACT. TE ACCORDINGLY ANSWER THE QUESTION REFE RRED TO US IN THE NEGATIVE, I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THERE SHALL BE NO ORDER COSTS. 17 ON SIMILAR FACTS, THE HONBLE ALLAHABAD HIGH COU RT HAS TAKEN SIMILAR VIEW IN THE CASE OF BHAIYALAL SHYAM B EHARI VS. CIT [2005] 276 ITR 38 (ALL). 18 IN THE PRESENT CASE, ON IDENTICAL FACTS AS IN TH E CASES OF VIJAY AGRICULTURAL INDUSTRIES AND BHAIYALAL SHYAM B EHARI (SUPRA), THE LEARNED CIT(A) IS NOT JUSTIFIED IN GIV ING THE BENEFIT OF PEAK CREDIT TO THE ASSESSEE. THEREFORE, IN THE C IRCUMSTANCES AND FACTS OF THE CASE, THE APPEAL OF THE REVENUE TO THAT EXTENT IS ALLOWED AND CROSS OBJECTION OF THE ASSESSEE IS DISM ISSED. 17 THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITIO N OF RS.47,000/- AND SUSTAIN THE BALANCE OF THE ADDITION . THUS, GROUND NO.1(C) OF THE REVENUES APPEAL IS PARTLY ALLOWED A ND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 19 GROUND NOS.3 AND 4 IN THE REVENUES APPEAL ARE G ENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 20 IN THE RESULT, THE REVENUES APPEAL IN ITA NO.450/AHD/2009 IS PARTLY ALLOWED AND THE ASSESSEE S CROSS OBJECTION IS DISMISSED. 21 NOW, WE TAKE UP THE REVENUES APPEAL IN ITA NO.1802/AHD/2009. THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN CANCELING THE ORDER LEVYING PENALTY OF RS.9,77,500/- U/S 271(1)(C) ON THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COU LD NOT PRODUCE ANY FRESH EVIDENCE OTHER THAN WHAT WAS SUBMITTED AT THE TIME OF PASSING ORIGINAL ASSESSMENT ORDER AND ALSO HE HAD C ONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER IN THE ORIGI NAL ASSESSMENT. RELIEF CLAIMED IN APPEAL . THE ORDER OF THE LD. CIT(A) MAY BE SET-ASIDE AND TH AT OF THE AO BE RESTORED. 22 AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE, MR. S N SOPARKAR, ADVOCATE POINTED OUT THAT THE AO HAS LEVI ED THE 18 PENALTY U/S 271(1)(C) OF THE ACT IN THE ORIGINAL AS SESSMENT PROCEEDINGS WHERE THE ASSESSMENT ORDER HAD BEEN PAS SED IN QUANTUM BY THE AO ON 31-03-2004, THE LEARNED CIT(A) PASSED THE ORDER ON 09-11-2004 AND THE TRIBUNAL AHMEDABAD BENCH HAD PASSED THE ORDER ON 15-09-2006 SETTING ASIDE THE OR DER TO THE FILE OF THE AO VIDE ITS ORDER IN ITA NO.107/AHD/2005 TO DECIDE VARIOUS GROUNDS AFRESH. SINCE THE QUANTUM ORDER HAS ALREADY BEEN SET-ASIDE ON VARIOUS ISSUES ON WHICH THE PENALTY HA D BEEN LEVIED BY THE AO IN THE PRESENT APPEAL, CANNOT BE SUSTAINE D AND THEREFORE THE IMPUGNED PENALTY U/S 271(1)(C) DOES N OT HAVE ANY EXISTENCE. 23 THE LEARNED DR, ON THE OTHER HAND, CONCEDED WHAT HAS BEEN ARGUED BY MR. S N SOPARKAR, ADVOCATE HEREINABOVE. 24 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS ON RECORD. IN THE PRESENT CASE, WE ARE CONVINCED WI TH THE ARGUMENTS MADE BY MR. S N SOPARKAR, ADVOCATE WHICH HAVE BEEN CONCEDED BY THE LEARNED DR I.E. WHEN THE MATTER HAS BEEN SET- ASIDE BY THE TRIBUNAL TO THE FILE OF THE AO FOR FRE SH ADJUDICATION, THEN THE PENALTY U/S 271(1)(C) DOES NOT HAVE EXISTE NCE, IS NOT UNDER DISPUTE. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE PENALTY U/S 271(1)(C) CANNOT BE LEVIED AN D ACCORDINGLY GROUND NO.1 OF THE REVENUES APPEAL IS DISMISSED. 25 IN THE RESULT, THE REVENUES APPEAL IN ITA NO.450/AHD/2009 IS PARTLY ALLOWED AND THE ASSESSEE S CROSS 19 OBJECTION IS DISMISSED. THE REVENUES APPEAL IN ITA NO.1802/AHD/2009 IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-12-2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (B P JAIN) ACCOUNTANT MEMBER DATE : 30-12-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S K G JEWELLERS, M G ROAD, CHOKSHI BAZAR, BARO DA 2. THE INCOME-TAX OFFICER, WARD-5(3), AAYAKAR BHAVA N, RACE COURSE CIRCLE, BARODA 3. CIT CONCERNED 4. CIT(A)-V, BARODA 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD