Deepak Jain, Ludhiana V. ITO, Ludhiana

ITA 506/CHANDI/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73588 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Keywords: Peak credit; Accommodation entries
• Section: 143(3); 133A; 68; 69; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.506 /CHD/2011 ASSESSMENT YEAR : 2007-08 DEEPAK JAIN, VS. THE INCOME TAX OFFICER, PROP.M//S PRIME COMMODITIES, WARD-1(1), 17E, PHASE-IV, FOCAL POINT, LUDHIANA. LUDHIANA. PAN: AECPJ2591K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI AMARVEER SINGH, DR DATE OF HEARING : 12.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX-I, LUDHIANA DATED 04.03. 2011 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT , 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1 THAT THE LEARNED CIT(A)-I, LUDHIANA HAS ERRED IN UPHOLDING ADDITION OF RS.5,98,82,294/- MADE BY THE ASSESSING OFFICER AS UNEXPLAINED INCOME UNDER SECTION 68 & 69 OF THE INCOME TAX ACT, 1961. 2. THAT THE ADDITION OF RS.5,98,82,294/- AS STATED ABO VE HAS BEEN UPHELD BY THE LEARNED CIT(A)-I, LUDHIANA AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY US HAS NOT BEEN CO NSIDERED PROPERLY. 3. THAT THE LEARNED CIT(A)-I, LUDHIANA HAS ERRED T O CONSIDER THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING AC COMMODATION ENTRIES THROUGH BANKING CHANNEL. AS SUCH, ADDITION OF RS. 5,98,82,294/- IN RESPECT OF DEPOSITS IN VARIOUS BANKS UPHELD BY HIM IS NOT ASSESSEE'S OWN MONEY BUT THE SAME RELATES TO TRANSACTIONS MADE DUR ING THE COURSE OF 2 BUSINESS PROVIDING OF ACCOMMODATION ENTRIES ON WHIC H ASSESSEE GETS ONLY COMMISSION, WHICH CAN ONLY BE TAXED. 4. THAT THE LEARNED CIT(A)-I, LUDHIANA HAS ERRED IN HOLDING THAT THE ADDITION OF THE ENTIRE BANK DEPOSITS AND THUS, HE H AS LOOKED INTO CREDIT SIDE ONLY AND HAS IGNORED THE DEBIT SIDE, THEREBY I GNORING THE SETTLED LAW THAT IF SOME ADDITION IS MADE ON THE BASIS OF SOME MATERIAL THEN THAT MATERIAL HAS TO BE USED IN TOTALITY AND NOT IN PIEC E MEAL. THE CIT(A)-I HAS FAILED TO CONSIDER THE BANK ACCOUNT IN TOTALITY . 5. THAT THE LEARNED CIT(A)-I, LUDHIANA HAS NOT CONS IDERED THE STATEMENT FILED BY THE ASSESSEE DURING THE COURSE OF HEARING OF ALL THE BANK ACCOUNTS AND ALSO CHEQUES ISSUED FROM SUCH BANK ACCOUNTS IN A CONSOLIDATED MANNER AND A BARE LOOK AT THE VARIOUS DEPOSITS AND ISSUANCE OF CHEQUES IMMEDIATELY, THEREAFTER, PROVE THAT IT I S A SIMPLE CASE OF PROVIDING THE ACCOMMODATION ENTRIES ESPECIALLY, C ONSIDERING THE FACT THAT MAXIMUM BALANCE OUTSTANDING AT ANY GIVEN POINT OF TIME WAS RS. 1,38,690/- ONLY AND HAD IT BEEN THE ASSESSEE'S OWN MONEY, THEN AMOUNT WOULD HAVE REMAINED IN THE BANK ACCOUNT SUBSTANTIAL PERIOD AND NATURE AND NEXUS OF THE ENTRIES IN THE BANK CLEARLY ESTABLISHE S THAT IT WAS SIMPLE CASE OF PROVIDING ACCOMMODATION ENTRIES. 6. THAT THE LEARNED CIT(A)-I, LUDHIANA HAS ALSO NOT CONSIDERED THAT EVEN FROM A BARE LOOK OF THE BALANCE SHEET, IT IS CLEAR THAT TH ERE ARE HARDLY AN ASSETS OF THE ASSESSEE AND HIS CAPITAL IS JUST RS. 2,04,793/- WHI CH ALSO PROVES THAT IT IS A CASE OF PROVIDING ACCOMMODATION ENTRIES ONLY . 7. THAT THE LEARNED CIT(A), LUDHIANA HAS ERRED IN U PHOLDING THE ADDITION OF RS.72,000/- ON ACCOUNT OF ALLEGED LOW HOUSEHOLD EXP ENSES BY NOT CONSIDERING OUR SUBMISSIONS PROPERLY. 8. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY CO VERED BY THE ORDER OF THE TRIBUNAL IN SHRI SUDHIR KUMAR SHARMA, HUF PR OP.M/S SUBH KRISHNA COMMODITIES, 70, NEW LAJPAT NAGAR, LUDHIANA VS. ITO, WARD VI(3), LUDHIANA IN ITA NOS.17 & 18/CHD/2013 RE LATING TO ASSESSMENT YEARS 2006-07 AND 2009-10 AND IN SHRI SU DHIR KUMAR SHARMA, HUF PROP.M/S S.K.& CO. COMMODITIES, 70, NEW LAJPAT NAGAR, LUDHIANA VS. ITO, WARD VI(3), LUDHIANA IN IT A NOS.19 & 20/CHD/2013 2013 RELATING TO ASSESSMENT YEARS 2006- 07 AND 2009- 10 ORDER DATED 20.9.2013. 3 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,50, 090/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THERE WERE HUGE CASH DEPOSITS IN THE BANK ACCO UNT TOTALING RS.5.98 CRORES. THE BREAK UP OF THE BANK-WISE DEPO SITS IS AVAILABLE AT PAGE 1 OF THE ASSESSMENT ORDER. THE ASSESSEE WA S SHOW CAUSED TO EXPLAIN THE SOURCE OF THE SAID DEPOSITS IN THE B ANK ACCOUNT. THE EXPLANATION OF THE ASSESSEE VIS-S-VIS THE CASH DEPO SITS WAS THAT IT WAS OUT OF CASH RECEIPTS FROM DIFFERENT CUSTOMER AS ADVANCE FOR PURCHASE OF COMMODITIES. THE ASSESSING OFFICER NOT ED THAT THE ASSESSEE HAD FAILED TO GIVE THE NAME AND ADDRESS OF THE BROKER OF WHOM HE WAS THE SUB-BROKER AND REFERENCE TO THE BOO KS OF ACCOUNT DOES NOT REFLECT ANY ACCOUNT AND TRADING WAS THROUG H MULTI COMMODITIES EXCHANGE OR ANY AUTHORIZED BROKER OF TH E SAID PARTY. FURTHER THE ASSESSEE HAD FAILED TO FURNISH NAMES AN D ADDRESSES OF THE PERSONS FROM WHOM THE CASH WAS RECEIVED AND EVE N THE BOOKS OF ACCOUNT REFLECTED ONLY THE NAMES WITHOUT ANY ADDRES SES. HENCE THE IDENTITY , CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WAS NOT VERIFIABLE. THE ASSESSING OFFICER MADE ADDITIO N ON ACCOUNT OF UNEXPLAINED AMOUNT OF RS.5,98,82,294/-. 5. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER. 6. WE FIND THAT SIMILAR ISSUE OF ADDITION UNDER SEC TION 68 OF THE ACT ON ACCOUNT OF CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE AROSE BEFORE THE TRIBUNAL IN BUNCH OF APPEALS WITH LEAD O RDER IN ITA NO. 713/CHD/2010 IN THE CASE OF SHRI SUDHIR KUMAR SHARM A VS ITO RELATING TO ASSESSMENT YEAR 2007-08 ALONGWITH ITA NOS. 963/C HD/2010, ITA 714/CHD/2010, ITA 964/CHD/2010 AND ITA 712/CHD/2010 & ITA 4 962/CHD/2010 (A.Y. 2007-08) VIDE ORDER DATED 27.06. 2013 HELD AS UNDER : 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. IN THE FACTS OF THE PRESENT CASE THE ASS ESSEE UNDER APPEAL IS FOR ASSESSMENT YEAR 2007-08 FOR THE PERIO D ENDING 31.3.2007. THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME O F RS.161,680/- FILED ON 01.11.2007. SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE ON 31.10. 2007 AND THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 31.10.200 7. THE COPY OF THE STATEMENT OF THE ASSESSEE RECORDED DURING TH E COURSE OF SURVEY IS PLACED ON RECORD. A PERUSAL OF THE SAID STATEMENT REFLECTS THAT THE CLAIM OF THE ASSESSEE DURING SURV EY WAS THAT M/S SUPER FINVEST (P) LTD. WAS SUB-BROKER BY LSE SECURI TIES LTD. AND ALSO WORKING AS SHARE BROKER. IN RESPECT OF M/S BI G BULL COMMODITIES P.LTD. AND M/S BEST BUY COMMODITIES P.L TD., THE ASSESSEE STATED THAT THESE WERE ENGAGED IN ACCOMMOD ATION ENTRIES; M/S SHUBH KRISHNA COMMODITIES P.LTD. WAS S TATED TO BE ENGAGED IN COMMODITY TRADING AND AS SUB-BROKER ON C OMMISSION BASIS. IT WAS CLAIMED BY THE ASSESSEE THAT IT WAS E NGAGED IN GIVING ACCOMMODATION ENTRIES. 17. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRU TINY AND STATEMENT OF THE ASSESSEE WAS RECORDED ON 14.12.200 9. IN REPLY TO THE QUERIES RAISED BY THE ASSESSING OFFICER WHIL E RECORDING THE SAID STATEMENT, THE PLEA OF THE ASSESSEE WAS THAT I T HAD RECEIVED CASH FROM ITS CLIENTS AND THE DETAILS WERE AVAILABL E IN BOOKS OF ACCOUNT WHICH WOULD BE PROVIDED TO THE ASSESSING OF FICER ON THE NEXT DATE OF HEARING. THE ASSESSING OFFICER REQUISI TIONED THE ASSESSEE TO PRODUCE ATLEAST 10 PERSONS WHO HAD DEPO SITED RS. ONE LAC AND ABOVE IN THE BANK ACCOUNT. THE ASSESSE E REPLIED THAT HE WOULD VERIFY THE RECORD AND INFORM THE STAT US. IN ANOTHER QUERY RAISED BY THE ASSESSING OFFICER THAT LET ME KNOW HOW THE ABOVE PERSONS DEPOSITED THE CASH IN YOUR BANK, THE REPLY OF THE ASSESSEE WAS CASH IS RECEIVED FROM CUSTOMERS AND T HE SAME IS DEPOSITED IN BANK. IN VIEW OF THE COMMODITIES EXC HANGE, THE ASSESSEE EXPLAINED THAT THE LUDHIANA COMMODITIES EX CHANGE CHARGE TRANSACTION CHARGES FROM THE ASSESSEE AT THE RATES DEPENDING ON TURNOVER. THE CONCERN M/S SHUBH KRISH NA, WHICH WAS THE PROPRIETOR CONCERN OF THE HUF OF THE ASSESS EE, WAS CLAIMED TO BE REGISTERED WITH LUDHIANA COMMODITIES EXCHANGE AND OTHER COMPANIES AND FIRMS OF WHICH HE WAS THE DIRECTOR/PROPRIETOR WERE CLAIMED TO BE BRANCHES/TRA DERS OF M/S SHUBH KRISHNA COMMODITIES. IN VIEW OF THE ENTRIES OF TRADING BEING CARRIED OUT ON BEHALF OF THE M/S SHUBH KRISHN A BY THE VARIOUS COMPANIES/PROPRIETORY CONCERNS OWNED BY THE ASSESSEE, IT WAS EXPLAINED THAT IN CASE OF ONE OR TWO TRANSAC TIONS, THE COMMODITY EXCHANGE ENTRY WAS THROUGH THE EXCHANGE A ND THE BALANCE ENTRIES WERE CLIENT TO CLIENT, WHICH WERE P ERMISSIBLE AS COMMERCIAL TRANSACTION, AS PER PREVALENT MARKET TRE NDS. THE ASSESSEE CLAIMED THAT SODA CONFIRMATION SLIP VOUCHE RS IN RESPECT OF COMMODITIES TRANSACTION WERE BEING MAINTAINED BY THE ASSESSEE, WHICH WOULD BE PROVIDED ON THE NEXT DATE OF HEARING. THE STATEMENTS WWAS AGAIN CONTINUED ON 21.12.2009 A ND THE PLEA OF THE ASSESSEE WAS THAT IT HAD NOT BROUGHT ANY REC ORD OR ANY 5 PERSONS TO BE PRODUCED ALONGWITH HIMSELF ON THE SAI D DATE OF HEARING, AS HE HAD COME FOR RECORDING OF HIS STATEM ENT. IN THE STATEMENT SO RECORDED, IN RESPECT OF VARIOUS CASH C REDITS/DEPOSITS IN THE BANK ACCOUNTS IN THE NAME OF DIFFERENT COMPA NIES IN WHICH HE WAS THE DIRECTOR/PROPRIETOR, THE ASSESSEE WAS AS KED TO GIVE THE SOURCE OF THE SAID CASH DEPOSITS IN VARIOUS BAN KS AND IT WAS STATED BY THE ASSESSEE THAT REPLY IS SAME AS STATE D ON 15.12.2009. HE FURTHER SUBMITTED THAT HE WOULD ST ATE FURTHER RELATING TO CASH DURING THE COURSE OF ASSESSMENT PR OCEEDINGS. 18. THE ASSESSING OFFICER FROM THE PERUSAL OF THE B ANK ACCOUNTS OF THE ASSESSEE WORKED OUT THE CASH CREDIT S IN THE SAID BANK ACCOUNTS TOTALING TO RS.126,66,000/- AS PER DE TAILS IN ANNEXURE-B TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER FURTHER NOTED THAT WHILE RECORDING THE STATEMENT, T HE ASSESSEE WAS ASKED TO PRODUCE 10 PERSONS FOR VERIFICATION AN D THE ASSESSEE FAILED TO PRODUCE ANY PERSON FOR VERIFICAT ION NOR ANY CONFIRMATION WAS FILED BY THE ASSESSEE. THE ASSESS EE HAD FAILED TO DISCHARGE THE INITIAL BURDEN CAST UPON HIM TO PR OVE GENUINENESS OF THE AMOUNTS CREDITED IN HIS BOOKS OF ACCOUNT I.E. BY PROVING THE IDENTITY OF THE PERSONS, WHO HANDED OVER THE CASH TO THE ASSESSEE OR PRODUCTION OF THE RELEVANT BOOKS OF ACCOUNT WHERE NAME, ADDRESS AND TRANSACTIONS ENTERED BY THE M WERE REFLECTED NOR FURNISHING ANY DETAILS OF SUCH PERSON S WHO HAD GIVEN HIM THE CASH AND EVEN CREDIT WORTHINESS OF TH E PERSONS GIVING CASH COULD NOT BE PROVED. THE ASSESSEE HAD F AILED TO FILE THE REQUISITE DETAILS DURING THE ASSESSMENT PROCEED INGS. THE ASSESSING OFFICER, THUS HELD THAT IN VIEW THEREOF, WHETHER THE CASH DEPOSITS BELONG GENUINELY TO THE CUSTOMERS OR IT BELONGED TO THE ASSESSEE, COULD NOT BE ASCERTAINED, RESULTING I N THE GENUINENESS OF THE TRANSACTIONS BEING NOT PROVED. IT WAS ALSO A FINDING OF THE ASSESSING OFFICER, THAT ONLY CASH DE POSITS WERE MADE IN THE BANK ACCOUNT AND THERE WERE NO CASH WIT HDRAWALS FROM THE SAID BANK. THE OUTGOINGS WERE ONLY CHEQUE S WHICH WERE UNVERIFIABLE. THE ASSESSEE HAD FAILED TO CORROBORA TE THE CASH DEPOSIT WITH ANY EVIDENCE OF THE IDENTITY OF THE DE POSITOR OR ANY OTHER EVIDENCE. THE ASSESSING OFFICER, THUS MADE A DDITION OF RS.126,66,000/-. 19. THE PLEA BEFORE THE CIT(APPEALS) RAISED BY THE ASSESSEE WAS TWO-FOLD I.E. THE PROVISIONS OF SECTION 68 WERE NOT TO BE APPLIED AND IT BEST THE ADDITION COULD BE RESTRICTE D TO THE PEAK CREDITS. THE CIT(APPEALS) UPHELD THE PEAK CREDIT T HEORY TO BE APPLIED TO THE FACTS OF THE CASE AND RESTRICTED THE ADDITION TO RS.10,55,260/-. THE CIT(APPEALS) HOWEVER, IN PRINCI PLE HELD THAT THE ASSESSING OFFICER WAS CORRECT IN HOLDING THAT T HE ABOVESAID ADDITIONS WERE MAINTAINABLE IN VIEW OF THE PROVISIO NS OF SECTION 68 OF THE ACT. 20. THE ASSESSEE IS IN APPEAL BEFORE US IN RESPECT OF BOTH THE INVOKING OF PROVISIONS OF SECTION 68 IN THE PRESENT CASE AND ALSO AGAINST THE ADDITION OF RS.10,55,260/-. THE REVENU E IS AGGRIEVED BY THE APPLICATION OF PEAK CREDIT THEORY IN THE HAN DS OF THE ASSESSEE AND SECOND, RELIEF ALLOWED TO THE ASSESSEE . 21. THE FIRST ISSUE TO BE ADDRESSED BY US IN THE PR ESENT FACTS AND CIRCUMSTANCES OF THE CASE IS WHETHER THE PROVIS IONS OF 6 SECTION 68 OF THE ACT ARE APPLICABLE TO THE FACTS O F THE PRESENT CASE. DURING THE COURSE OF SURVEY CONDUCTED U/S 13 3A OF THE ACT ON 31.10.2007, IN THE STATEMENT RECORDED, THE ASSES SEE ADMITTED TO BE ENGAGED IN THE BUSINESS OF GIVING ACCOMMODATI ON ENTRIES. THE MODUS-OPERANDI EXPLAINED DURING THE COURSE OF S URVEY WAS THAT THE ASSESSEE WAS RECEIVING THE AMOUNT IN CASH AND THE SAME WERE BEING RETURNED VIDE CHEQUES THROUGH BANK ACCOU NTS. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE STATEMENT OF THE ASSESSEE WAS AGAIN RECORDED WHEREI N WHEN CONFRONTED WITH THE BANK STATEMENT OF M/S BIG BULL COMMODITIES PVT. LTD. WITH CENTURIAN BANK, PAKHOWAL ROAD, LUDHI ANA IN WHICH HUGE CASH WAS DEPOSITED BY VARIOUS ENTRIES, T HE ASSESSEE IN REPLY STATED THAT THE CASH WAS DEPOSITED AS PER BOOKS OF ACCOUNT ON BEHALF OF THE CLIENTS. VIDE QUERY NO.8, THE ASSESSEE WAS ASKED TO PROVIDE THE NAMES AND ADDRESSES OF THE CUSTOMERS/CLIENTS WHO HAD DEPOSITED THESE AMOUNTS. THE REPLY OF THE ASSESSEE IN THIS REGARD WAS, IF DETAILS ARE TH ERE, I WILL CHECK FROM BOOKS OF ACCOUNT AND PROVIDE THE SAME. THE ASSESSEE, THEREAFTER WAS DIRECTED TO PRODUCE ATLEAS T 10 PERSONS WHO HAD DEPOSITED RS.1 LAC AND ABOVE IN THE BANK AC COUNT. THE ASSESSEE EXPLAINED THAT HE WILL VERIFY FROM RECORD AND LET THE ASSESSING OFFICER KNOW ABOUT IT. IN REPLY TO QUERY NO.10, THE ASSESSEE CLAIMED THAT CASH IS RECEIVED FROM CUSTOME RS AND SAME IS DEPOSITED IN BANK. THE PLEA OF THE ASSESSEE BEF ORE THE ASSESSING OFFICER WAS THAT HE WAS ENGAGED IN THE BU SINESS OF COMMODITIES AND QUERY NO.12, 13 WERE RAISED IN RESP ECT OF THE COMMISSION RECEIVED FROM LUDHIANA COMMODITIES EXCHA NGE. THE REPLY OF THE ASSESSEE TO QUERY NO.13 I.E. ARE YOU REGISTERED WITH LUDHIANA COMMODITY EXCHANGE WAS THAT ONLY M/S SHU BH KRISHNA OF WHICH HUF IS THE PROPRIETOR AND I AM KAR TA OF HUF IS REGISTERED WITH LCE AND OTHER COMPANIES AND FIRMS I N WHICH I AM DIRECTOR OR PROPRIETOR ARE BRANCHES/TRADERS OF M /S SHUBH KRISHNA COMMODITIES. THE QUERY NO.14 WAS WHETHER THE SAID COMPANIES/FIRMS WHO WERE THE TRADERS OF M/S SHUBH K RISHNA WERE PAYING ANY CHARGES TO M/S SHUBH KRISHNA THE REPLY OF THE ASSESSEE IN THIS REGARD WAS THAT HE WOULD LET THE ASSESSING OFFICER KNOW AFTER CHECKING THE SAME. QUERY NO. 16 TO 19 AND THEIR ANSWERS WERE AS UNDER: Q:-16 IS THE TRANSACTION, MADE BY ABOVE STATED COMPANIES THROUGH RECOGNIZED COMMODITIES EXCHANGE OR NOT. ANS: T IS THROUGH EXCHANGE IN ONE OR TWO CASE S IS OTHER CASES IT MAY BE CLIENT TO CLIENT. M/S B.K COMMODITIES AND M /S M.K COMMODITIES ARE REGISTERED WITH LUDHIANA, COMMODITI ES EXCHANGE OTHERS ARE NOT. Q:-17 YOU HAVE STATED THAT IN SOME CONCERNS I R OUTED BUSINESS PRIVATELY NOT THROUGH MCX. IT MEANS YOU RUNNING A PARALLEL COMMODITIES EXCHANGE, PLEASE EXPLAIN THE SAME. ANS: T IS NOT CORRECT THAT WE ARE RUNNING PAR ALLEL RUNNING EXCHANGE HOWEVER CLIENT TO CLIENT DEALING AS PER P REVALENT MARKET RATE ARE PERMISSIBLE AS COMMERCIAL TRANSACTIONS. Q-.-18 YOU ARE REQUESTED TO PROVIDE THE SODA BO OK MAINTAINED BY YOU FOR RUNNING THE BUSINESS. 7 ANS: WHAT EVER IS AVAILABLE RELATING TO THESE TRANSACTIONS WILL BE PROVIDED ON THE NEXT DATE. Q:-19 WHICH TYPE DOCUMENTS YOU TAKE FROM THE CL IENT/CUSTOMER & WHEN YOU DO THE TRANSACTION FOR THEM. ANS: IT IS SODA CONFIRMATION SLIP VOUCHER CO MMODITIES BE PROVIDE TOMORROW. STATEMENT WILL BE CONTINUED ON 15 .12.2009. IN CONTINUATION TO THE ABOVE STATEMENT. 21.12.2009. 22. A BARE PERUSAL OF THE STATEMENT RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS REFLECT THAT THE CLAIM OF THE ASSESSEE TO HAVE CHANGED. THE ASSESSEE ADMITS THAT ONLY M/S SHUBH KRISHNA WAS REGISTERED WITH LUDHIANA COMMODITIES EX CHANGE AND REST ALL THE CONCERNS WERE THE BRANCHES OR TRAD ERS OF M/S SHUBH KRISHNA COMMODITIES. IN RESPECT OF THE CASH D EPOSIT IN THE BANK ACCOUNT OF ONE OF THE CONCERN, THE ASSESSEE ST ATED THAT IT HAD RECEIVED CASH FROM VARIOUS PARTIES AND THE SAME WAS AS PER THE BOOKS OF ACCOUNT. THE CASE OF THE ASSESSEE WAS THAT IT WAS RECEIVING CASH FROM ITS CLIENTS. BUT BEFORE THE ASS ESSING OFFICER IT WAS NOT THE CASE OF THE ASSESSEE THAT IT WAS EN GAGED IN PROVIDING ACCOMMODATION ENTRIES. IN RESPECT OF THE ENTRIES NOT BEING THROUGH THE EXCHANGE, THE ASSESSEE CLAIMED TH AT CLIENT TO CLIENT TRANSACTIONS WERE PERMISSIBLE AS COMMERCIAL TRANSACTIONS. THE STATEMENT WAS CONTINUED ON 21.12.2009 AND AS PE R QUERY NO.24, THERE WAS A SPECIFIC QUERY RAISED TO EXPLAIN VARIOUS CASH CREDITS/DEPOSITS IN THE BANK ACCOUNTS OF DIFFERENT COMPANIES IN WHICH THE ASSESSEE WAS THE DIRECTOR AND THE ASSESSE E WAS ALSO ASKED TO GIVE SOURCE OF CASH DEPOSITS IN VARIOUS AC COUNTS. IN REPLY TO THE SAME, A SHORT REPLY WAS GIVEN BY THE A SSESSEE THAT IT IS THE SAME AS WHAT IS STATED ON 15.12.2009. AT TH E CONCLUSION OF RECORDING OF THE STATEMENT, THE ASSESSEE STATED THA T HE WOULD FURTHER EXPLAIN RELATING TO THE CASH, DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSEE FAIL ED TO PRODUCE THE BOOKS OF ACCOUNT NOR GIVE ANY EXPLANATION VIS- -VIS THE SOURCE OF CASH DEPOSITS IN THE BANK ACCOUNT. IN THE ABSENCE OF ANY EXPLANATION OR ANY EVIDENCE BEING PRODUCED BY T HE ASSESSEE. THE ONUS CAST UPON THE ASSESSEE NOT BEING DISCHARGE D, THE SAID CASH CREDITS ARE TO BE INCLUDED AS INCOME OF THE AS SESSEE IN VIEW OF THE PROVISIONS OF SECTION 68 OF THE ACT. 23. SECTION 68 OF THE ACT READS AS UNDER : 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF A N ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLAN ATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SAT ISFACTORY, UNLESS 8 ( A ) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH C REDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANA TION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CA PITAL COMPANY AS REFERRED TO IN CLAUSE ( 23FB ) OF SECTION 10 . 24. UNDER THE PROVISIONS OF SECTION 68 OF THE ACT, IT IS PROVIDED THAT WHERE THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE CREDITS IN THE BOOKS OF ACCOUNT, ALL THE AMOUNTS SO CREDITED OR WHERE THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY IN RELATION TO THE SAME, THEN SUCH CREDITS MAY BE CHARGED TO TAX AS INCOME OF THE ASSESSEE FOR THAT P ARTICULAR PREVIOUS YEAR. ADMITTEDLY, IN THE CASE OF THE ASSE SSEE, VARIOUS AMOUNTS IN CASH ARE DEPOSITED IN THE BANK ACCOUNTS OF THE ASSESSEE AND THE ONUS WAS UPON THE ASSESSEE TO EXPL AIN NATURE AND ALSO THE SOURCE OF THE SAID CASH DEPOSITS. THE ASSERTION OF THE ASSESSEE IN THIS REGARD WAS THAT IT WAS THE AMO UNT RECEIVED FROM CLIENTS. HOWEVER, THE ASSESSEE FAILED TO GIVE THE LIST OF SUCH PERSONS WHO HAD ADVANCED THE SAID CASH TO THE ASSES SEE. THE ASSESSEE EVEN FAILED TO BRING ON RECORD ANY EVIDENC E TO PROVE ITS STAND THAT IT WAS THE AMOUNT RECEIVED FROM SUCH PER SONS WHO WERE HIS CLIENTS. THE ASSESSEE FAILED TO FILE ANY CONFIRMATION IN RESPECT OF THE SAID CASH CREDITS NOR ANY OF THE PER SONS WERE PRODUCED FOR EXAMINATION BEFORE THE ASSESSING OFFIC ER, THOUGH SPECIFIC DIRECTION IN THIS REGARD WAS GIVEN BY THE ASSESSING OFFICER WITHIN THE COURSE OF RECORDING OF STATEMENT OF THE ASSESSEE, DURING ASSESSMENT PROCEEDINGS. THE ASSES SEE EVEN FAILED TO PRODUCE THE BOOKS OF ACCOUNT. IN THE ABS ENCE OF THE ASSESSEE HAVING DISCHARGED HIS ONUS OF PROVING THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE CASH TRANS ACTION OF THE CASH CREDITS IN THE BANK ACCOUNT, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD AND DISMISS THE SAME. 25. ANOTHER PLEA RAISED BY THE LD. AR BEFORE US WAS THAT AS THE ASSESSEE WAS ENGAGED IN GIVING ACCOMMODATION ENTRIE S, ONLY COMMISSION SHOULD BE INCLUDED AS INCOME OF THE ASSE SSEE. ADMITTEDLY, WHILE RECORDING THE STATEMENT DURING TH E COURSE OF SURVEY, THE ASSESSEE HAD STATED THAT IT WAS ENGAGED IN THE BUSINESS OF GIVING ACCOMMODATION ENTRIES. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT RAISE ANY SUBMISSIONS IN THIS REGARD AND ON THE OTHER HAND, T HE ASSESSEE TIME AND AGAIN, IN THE COURSE OF STATEMENT RECORDED DURING THE ASSESSMENT PROCEEDINGS, POINTED OUT THAT THE CASH D EPOSITED IN THE BANK ACCOUNT WAS AS PER ENTRIES IN THE BOOKS OF ACCOUNT AND THE SAME WOULD BE EXPLAINED FROM THE BOOKS OF ACCOU NT. THE PLEA OF ACCOMMODATION ENTRIES WAS NOT PUT TO THE ASSESSI NG OFFICER. HOWEVER, BEFORE CIT(APPEALS), A PLEA WAS RAISED THA T ONLY COMMISSION IS TO BE ADDED IN THE HANDS OF THE ASSES SEE IN VIEW OF VARIOUS JUDICIAL PRECEDENTS. A PERUSAL OF THE ORDE R OF THE CIT(APPEALS) DOES NOT REFLECT ANY FINDINGS ON THIS ISSUE AND ISSUES ADDRESSED BY THE CIT(APPEALS) WERE WHETHER P ROVISIONS OF SECTION 68 ARE APPLICABLE AND IN THE ALTERNATIVE, W HETHER PEAK- 9 CREDIT IS TO BE APPLIED IN THE HANDS OF THE ASSESSE E. THE ASSESSEE IN THIS GROUND OF APPEAL RAISED BEFORE THE TRIBUNAL HAS NOT RAISED ANY SUCH ISSUE OF THE COMMISSION INCOME BEIN G INCLUDED IN HIS HANDS. ONLY TWO ISSUES HAVE BEEN RAISED; I.E. INVOKING OF PROVISIONS OF SECTION 68 OF THE ACT AND CONFIRMATIO N OF ADDITION OF RS.1055,260/-. THE ISSUE OF WHETHER THE ASSESSE E IS ENGAGED IN GIVING ACCOMMODATION ENTRIES OR NOT IS A PURELY FACTUAL ISSUE WHICH HAS NOT BEEN RAISED BEFORE THE AUTHORITIES BE LOW I.E. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR EVEN BEFORE THE CIT(APPEALS), THE SAID ISSUE HAS NOT BEEN ADJUDICAT ED. THE PLEA OF THE ASSESSEE OF ADMISSION OF SUCH NEW FACTUAL IS SUE IS NOT ADMISSIBLE AT THIS STAGE OF ADJUDICATING OF THE APP EAL IN THE CAPTIONED YEARS. WE FIND NO MERIT IN THE SAID PLEA OF THE ASSESSEE AND THE SAME IS REJECTED. 26. WE ARE IN CONFORMITY WITH THE ORDER OF CIT(APPE ALS) IN HOLDING THAT THE PROVISIONS OF SECTION 68 OF THE AC T IN THE PRESENT SET OF FACTS AND CIRCUMSTANCES OF THE CASE ARE APPL ICABLE AND WE UPHOLD THE ORDER OF CIT(APPEALS) IN THIS REGARD. 27. THE RELIANCE PLACED UPON BY THE ASSESSEE ON VAR IOUS CASE LAWS HAS BEEN REFERRED TO AND COMMENTED UPON BY THE CIT(APPEALS) AND WE ARE IN CONFORMITY WITH THE FIND INGS OF CIT(APPEALS) IN THIS REGARD. 28. THE NEXT ISSUE RAISED IN THE PRESENT APPEALS IS IN RELATION TO THE APPLICABILITY OF PEAK CREDIT THEORY. IN THE FACTS OF THE PRESENT CASE, THE SAID PEAK CREDIT THEORY IS NOT AP PLICABLE AS THE ASSESSEE HAD DEPOSITED CASH IN THE BANK ACCOUNT AND THEREAFTER, CHEQUES WERE ISSUED TO DIFFERENT PARTIES. IT IS NO T A CASE WHERE CASH WAS DEPOSITED ON DIFFERENT DATES AND IN BETWEE N, THERE WERE CASH WITHDRAWALS FROM THE BANK ACCOUNT. IT IS A CA SE WHERE THERE ARE DEPOSITS IN CASH BUT AS AGAINST THE SAID CASH DEPOSITED, VARIOUS CHEQUES WERE ISSUED AND THE ASSESSEE WAS UN ABLE TO EXPLAIN THE SOURCE OF CASH DEPOSITED IN HIS BANK AC COUNT. REJECTING THE THEORY OF PEAK CREDITS APPLIED BY THE ASSESSING OFFICER, WE REVERSE THE FINDINGS OF CIT(APPEALS) IN THIS REGARD AND RESTORE THE ADDITION MADE BY THE ASSESSING OFFI CER AT RS. 1,26,66,000/-. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BLE ALLAHABAD HIGH COURT IN BHAIYA LAL SHYAM BE HARI V COMMISSIONER OF INCOME-TAX (SUPRA) WHEREIN THE COUR T HELD AS UNDER : DURING THE ASSESSMENT YEAR IN QUESTION CERTAIN AMO UNT OF CASH CREDITS STANDING IN THE NAMES OF VARIOUS PERSONS WE RE ADDED IN THE INCOME OF THE APPLICANT BY INVOKING THE PROVISI ON OF SECTION 68 OF THE ACT. BEFORE THE TRIBUNAL THE ALTERNATIVE PLEA WAS TAKEN BY THE APPLICANT THAT IN THE EVENT DEPOSIT/CASH CRE DITS ARE TREATED TO BE UNEXPLAINED THEN ONLY PEAK CREDIT IS TO BE ADDED. THE SUBMISSION HAS BEEN NEGATIVED BY THE TRIBUNAL I N THE FOLLOWING WORDS : '13. LET US SUPPOSE THAT IN THE ACCOUNT OF 'A', THE RE WAS SHOWN A DEPOSIT OF RS. 10,000 ON APRIL 1,1978, AND IN THE A CCOUNT OF 'B' THERE WAS A DEPOSIT OF RS. 10,000 ON DECEMBER 1, 19 78. THE ASSESSEE HAS NOT ESTABLISHED THE GENUINENESS OF THE SE TWO DEPOSITS. NOW ACCORDING TO THE ASSESSEE IN CASE THE RE WAS A WITHDRAWAL OF RS. 10,000 IN THE ACCOUNT OF 'A' PRIO R TO THE 10 DEPOSIT OF RS. 10,000 IN THE ACCOUNT OF 'B' THEN NO SEPARATE ADDITION SHOULD BE RESORTED TO ON ACCOUNT OF UNEXPL AINED DEPOSIT IN THE ACCOUNT OF 'B'. ACCORDING TO THE ASS ESSEE, IT SHOULD BE PRESUMED THAT THE DEPOSIT IN THE ACCOUNT OF 'B' WAS MADE OUT OF THE FUNDS WHICH WERE AVAILABLE TO THE A SSESSEE AFTER THE WITHDRAWAL OF THE AMOUNT FROM THE ACCOUNT OF 'A '. WE CANNOT SUBSCRIBE TO THIS POINT OF VIEW. ACCORDING TO US, I F THE ASSESSEE IS NOT ABLE TO PROVE THE GENUINENESS OF THE DEPOSIT IN THE ACCOUNT OF 'B', A SEPARATE ADDITION IN RESPECT OF T HAT WILL BE REQUIRED TO BE MADE. AS PER THE PROVISIONS OF SECTI ON 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESS EE AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SA TISFACTORY, THE SUM SO CREDITED IS TO BE CHARGED TO INCOME-TAX AS T HE INCOME OF THE ASSESSEE. HENCE, IT IS FOR THE ASSESSEE TO ESTA BLISH THE SOURCE OF THE DEPOSIT IN THE ACCOUNT OF 'B'. IF THE ASSESS EE ADMITS THAT THE ALLEGED DEPOSIT IN THE ACCOUNT OF 'A' WAS NOT G ENUINE AND, IN FACT, IT WAS THE ASSESSEE'S OWN MONEY WHICH HAD BEE N INTRODUCED IN THE BOOKS IN THE GARB OF A LOAN FROM 'A' AND HENCE WHEN THIS AMOUNT WAS AVAILABLE TO THE ASSESSEE FOR BEING INTRODUCED AS A FRESH DEPOSIT IN THE ACCOUNT OF 'B' THEN IT MAY BE POSSIBLE TO ACCEPT THE CONTENTION OF THE ASSESSEE. BUT IN CASE THE ASSESSEE ALL ALONG MAINTAINS THAT THE VARIOUS LOANS ARE GENUINE THEN WE FAIL TO UNDERSTAND AS TO HOW THE ASSESSEE C AN PUT FORWARD THE CLAIM THAT SEPARATE ADDITIONS FOR THE U NEXPLAINED CASH CREDIT IN DIFFERENT ACCOUNTS SHOULD NOT BE MAD E. WHEN THE ASSESSEE HIMSELF DOES NOT CONTEND THAT THE DEPOSIT MADE IN THE ACCOUNT OF 'B' IS OUT OF PRIOR WITHDRAWAL MADE IN T HE ACCOUNT OF 'A', HOW DOES THE ASSESSEE EXPECT THE DEPARTMENT TO SUBSCRIBE TO THIS POINT OF VIEW. WE HENCE REJECT THIS CONTENTION OF THE ASSESSEE.' HEARD SRI KRISHNA AGRAWAL, LEARNED COUNSEL FOR THE APPLICANT AND SRI SHAMBHU CHOPRA LEARNED STANDING COUNSEL FOR THE REVENUE. THE APPLICANT SUBMITTED THAT AS THE AMOUNT OF CASH CREDIT HAS BEEN TREATED TO TAX BY INVOKING THE PROVISIONS OF S ECTION 68 OF THE ACT AND THE SAID AMOUNT HAVE BEEN TREATED AS IN COME FROM THE UNEXPLAINED SOURCE, THE APPLICANT WAS ENTITLED TO TAKE UP A PLEA OF ADDITION OF THE AFORESAID PEAK CREDIT AS TH E ENTIRE DEPOSITS HAVE BEEN TREATED TO BE INCOME OF THE APPL ICANT. THE CONTENTION IS WHOLLY MISCONCEIVED. FOR ADJUDICATING UPON THE PLEA OF PEAK CREDIT THE FACTUAL FOUNDATION HAS TO B E LAID BY THE ASSESSEE. HE HAS TO OWN ALL CASH CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND ONLY THEREAFTER THE QUESTION OF PEAK CR EDIT CAN BE RAISED. AS IN THE PRESENT CASE THE AMOUNT OF CASH C REDITS WERE STANDING IN THE NAMES OF DIFFERENT PERSONS WHICH AL L ALONG THE APPLICANT HAD BEEN CLAIMING TO BE GENUINE DEPOSIT, WITHDRAWAL/PAYMENT OF THE AMOUNT TO DIFFERENT SET O F PERSONS DURING THE PREVIOUS YEARS WOULD NOT AT ALL ENTITLE THE APPLICANT TO CLAIM BENEFIT OF PEAK CREDIT. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY LEGAL INFIRMITY IN THE ORDER OF THE TRIBUNAL. WE ANSWER THE AFORESAID QUESTIONS REFERRED TO US IN THE NEGATIVE, I.E. IN FAVOUR OF T HE REVENUE AND AGAINST THE ASSESSEE. THERE WILL BE HOWEVER, NO ORD ER AS TO COSTS. OTHER INFORMATION 11 IN FAVOUR OF REVENUE 29. THE GROUNDS OF APPEAL NO. 1(A) TO 1(C) RAISED B Y THE ASSESSEE ARE, THUS DISMISSED AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED. 7. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTI CAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL (SUPRA) IN THE BUNCH OF APPEALS AND FOLLOWING THE SAME PARITY OF REASONING, WE DISMISS THE GROUND NOS. 1 TO 7 RAISED BY THE ASSESSEE. 8. THE ISSUE IN GROUND NO.8 IS AGAINST THE ADDITION MADE ON ACCOUNT OF LOW HOUSEHOLD EXPENSES. THE FAMILY OF THE ASSES SEE CONSISTED OF FATHER, MOTHER AND THREE BROTHERS AND TOTAL WITHDRA WAL OF RS.1,08,000/- WAS MADE FOR HOUSEHOLD EXPENSES DURING THE YEAR UND ER CONSIDERATION. IN ADDITION, THE ASSESSEE HAD INCURRED EXPENSES ON ELECTRICITY AND TELEPHONE EXPENSES. THE ASSESSEE WAS A BACHELOR AN D WAS LIVING WITH HIS PARENTS IN THEIR SELF OWNED HOUSE. THE ASSESSING O FFICER HAD ESTIMATED THE HOUSEHOLD EXPENSES AT RS.2 LACS FOR THE YEAR RE SULTING IN ADDITION OF RS.72,000/-. IN THE TOTALITY OF THE FACTS AND CIRC UMSTANCES, WE RESTRICT THE ADDITION TO RS.36,000/-. THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 12