Gurpreet Singh, Jalandhar V. The Income-tax Officer, Jalandhar

ITA 590/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8696 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Keywords: Peak credit
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR) BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.590/ASR/2016 (ASSESSMENT YEAR-2010-11) GURPREET SINGH, 47-R MODEL TOWN, PRESENTLY, C- 15, SILVER HEIGHT, JALANDHAR. PAN NO.ALKPS4036K (ASSESSEE) VS .. ITO-WARD III(4) JALANDHAR. (REVENUE) ASSESSEE BY SHRI . Y. K. SUD, AR. REVENUE BY SHRI BHAWANI SHANKAR,DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR-2 010-11, TAKING THE FOLLOWING GROUNDS: 1. THAT CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ACTION OF ITO IN MAKING THE BEST JUDGMENT ASSESSMENT. 2. THAT THE CIT(A) WAS NOT JUSTIFIED IN GIVING A FI NDING THAT AMPLE OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO DEFEND HIS CASE DATE OF HEARING 19.01.2017 DATE OF PRONOUNCEMENT 27.03.2017 I.T.A NO.590/ASR/2016 2 WHEREAS THE ASSESSEE HAS SPECIFICALLY DENIED THAT N O NOTICE FOR 13.02.2013 WAS SERVED UPON THE ASSESSEE BY THE ITO. 3. THAT THE CIT(A) HAS WRONGLY SUSTAINED THE CONTRA DICTORY FINDING OF THE ITO IN FRAMING THE ASSESSMENT U/S 14 3(3) WHEREAS THE ITO HIMSELF HAS STATED THAT HE IS MAKIN G BEST JUDGMENT ASSESSMENT. 4. THAT ADDITION OF RS.3,54,601/- MADE BY THE AO AS INCOME FROM UNDISCLOSED SOURCE HAS BEEN WRONGLY SUSTAINED BY TH E CIT(A). 2. THE FACTS ARE THAT THE ASSESSEE IS AN ADVOCATE B Y PROFESSION AND IS ENGAGED IN PRACTICE. FURTHER, HE IS ALSO 50% PARTNER IN THE FIRM M/S. PAPILLON INTERNATIONAL JALANDHAR AND THE FIRM IS ENGAGED IN THE MANUFACTUR ING AND SALE OF FURNITURE. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ON THE BASIS OF AIR INFORMATION THAT THE ASSESSEE HAD MADE CASH DEPOSITS OF RS.11,8 5,500/- IN THE SAVINGS BANK ACCOUNT REFERRED TO IN PARA 2 OF THE ASST. ORDER. T HE ASSESSMENT WAS FRAMED BY THE ITO IN THE ABSENCE OF THE ASSESSEE ON THE BASIS OF MATERIAL ON RECORD AND WITHOUT NOTICE TO THE ASSESSEE FOR 13.02.2013. THE ASSESSME NT WAS MADE BY MAKING AN ADDITION OF RS.13,54,601/- AS INCOME FROM UNDISCLOS ED SOURCES WHICH THE AO CALCULATED AS DIFFERENCE OF CASH DEPOSITS, I.E., RS .11,85,500/- MINUS PROFESSIONAL RECEIPTS OF RS.8,30,899/-. THE RESULTING DIFFERENCE OF RS. 3,54,601/- WAS TREATED AS UNDISCLOSED INCOME ON ACCOUNT OF UNEXPLAINED CASH D EPOSITED IN THE BANK. I.T.A NO.590/ASR/2016 3 3. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE LD. CIT(A) HAS DEVIATED FROM THE ISSUE WHICH WAS NOT EVEN THE CASE OF THE ITO WHO FRAMED THE ASSESSMENT, BECAUSE THE CIT(A) LOST SIGHT OF THE FA CT THAT ASSESSEE, IN ADDITION TO HIS PROFESSIONAL PRACTICE, WAS ALSO A PARTNER IN TH E FIRM M/S. PAPPILON INTERNATIONAL AND A PERUSAL OF THE COPY OF CAPITAL ACCOUNT IN THE FIRM (COPY FILED) CLEARLY SHOWS THAT THE ASSESSEE HAD WITHDRAWN RS. 90,000/- IN CAS H FOR HOUSEHOLD EXPENSES. HE SUBMITTED THAT THE PRESUMPTION OF THE CIT(A) THAT W ITHDRAWALS MADE FROM THE BANK CANNOT BE CONSIDERED IN THE CASE OF THE ASSESSEE, D UE TO THE ABOVE FACTS, CANNOT BE SUSTAINED AND ALSO IT IS WELL SETTLED LAW THAT IF T HERE ARE DEPOSITS AND WITHDRAWALS IN THE BANK ACCOUNT OF THE ASSESSEE, THEN, WHILE MAKIN G ADDITION, THE CREDIT FOR WITHDRAWALS AGAINST THE CASH DEPOSITS HAS TO BE ALL OWED, UNLESS THE DEPARTMENT PROVES THAT THE WITHDRAWALS HAVE BEEN MADE FOR SOME OTHER PURPOSE, THAT THIS WAS NOT THE CASE MADE OUT BY THE AO, BUT THE CIT(A), WH ILE PRESUMING THAT THE WITHDRAWALS HAVE BEEN SPENT FOR HOUSEHOLD EXPENSES, IGNORED THE WITHDRAWALS OF RS. 90,000/-MADE BY THE ASSESSEE FROM THE FIRM, FOR HOUSEHOLD WITHDRAWALS; HENCE, THE ADDITION SUSTAINED BY THE CIT(A) DESERVES TO BE DELETED. I.T.A NO.590/ASR/2016 4 4. THE LD. DR RELIED THE IMPUGNED ORDER. 5. REGARDING THE ADDITION OF RS.3,54,601/-, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE ADDITION FOR UNEXPLA INED DEPOSITS IN THE BANK COULD HAVE BEEN MADE ON THE BASIS OF PEAK CASH CREDIT CHA RT AND IT WAS SO SUBMITTED BEFORE THE CIT(A), AS REPRODUCED IN PARA 5.4 OF HIS ORDER. IT WAS FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE PEAK DEPOSITS AND WITHDR AWALS IN THE BANK WORK OUT AT RS. 8,27,200/-, WHEREAS THE CREDIT FOR CASH PROFESS IONAL RECEIPTS OF RS. 8,30,899/- HAS BEEN GIVEN BY THE AO HIMSELF IN PARA 2 OF HIS O RDER AND THAT HENCE, IF THE CREDIT GIVEN BY THE AO WAS CONSIDERED, THEN NO ADDITION CO ULD BE MADE AND THE PEAK DEPOSIT AMOUNTS TO RS.8,27,200/-, WHICH IS LESSER THAN RS.8,30,899/-. AGAINST THIS CONTENTION OF THE ASSESSEE, THE CIT(A), IN PARA 5.5 OF HIS ORDER, GAVE A FINDING THAT PEAK CREDIT CANNOT BE CONSIDERED IN THE CASE OF TH E ASSESSEE ON TWO GROUNDS, THAT CASH WITHDRAWALS OF RS.2,08,600/- MUST HAVE BEEN US ED BY THE ASSESSEE FOR PERSONAL USE AND SECONDLY, THAT IT IS WORKED OUT ON LY IN THE CASE OF DEBTORS AND CREDITORS WHICH ARE NOT DISCLOSED. 6. AS CORRECTLY CONTENDED, THE CIT(A) HAS DEVIATED FROM THE ISSUE WHICH WAS NOT EVEN THE CASE OF THE ITO WHO FRAMED THE ASSESSM ENT, SINCE THE CIT(A) IGNORED THE FACT THAT THE ASSESSEE, IN ADDITION TO HIS PROF ESSIONAL PRACTICE, WAS ALSO A PARTNER I.T.A NO.590/ASR/2016 5 IN THE FIRM M/S. PAPPILON INTERNATIONAL. THE COPY O F CAPITAL ACCOUNT IN THE FIRM SHOWS THAT ASSESSEE HAD WITHDRAWN RS. 90,000/- IN C ASH FOR HOUSEHOLD EXPENSES. THE PRESUMPTION OF THE CIT(A), THAT WITHDRAWALS MAD E FROM THE BANK CANNOT BE CONSIDERED IN THE CASE OF THE ASSESSEE, IS NOT SUST AINABLE. IF THERE ARE DEPOSITS AS WELL AS WITHDRAWALS IN THE BANK ACCOUNT OF THE ASSE SSEE, THEN, WHILE MAKING ADDITION, CREDIT FOR THE WITHDRAWALS AGAINST THE DE POSITS HAS TO BE GIVEN, UNLESS THE DEPARTMENT SHOWS THAT WITHDRAWALS HAVE BEEN USED FO R SOME OTHER PURPOSE. IT WAS NOT SO PROVED BY THE AO. THE CIT(A) ERRED IN FAILIN G TO TAKE INTO CONSIDERATION THE WITHDRAWALS OF RS. 90,000/-MADE BY THE ASSESSEE FRO M THE FIRM, FOR HOUSEHOLD WITHDRAWALS. 7. IN SHIV CHARAN DASS VS. CIT, 126 ITR (P&H) 26 3, IT HAS BEEN HELD THAT WHERE THE CASH IS AVAILABLE WITH THE ASSESSEE AND T HE SAME WAS DEPOSITED EVEN AFTER 3-4 YEARS, NO ADDITION CAN BE MADE, UNLESS THE DEPA RTMENT PROVES THAT THE CASH HAS BEEN UTILIZED FOR SOME OTHER PURPOSE. SHIV CHARAN DASS (SUPRA) FOLLOWED BY THE AMRITSAR ITAT BENCH IN THE CASE OF ITO VS CHAMAN L AL NAGPAL, 102 TTJ(ASR) 890. 8. IN R.K. DAVE VS. ITO, 94 TTJ(JD) 19, THE ASSES SEE HAVING SUBMITTED CASH FLOW STATEMENT AND THERE BEING NO EVIDENCE WITH T HE AO THAT THE AMOUNT WAS I.T.A NO.590/ASR/2016 6 UTILIZED FOR SOME OTHER PURPOSES, ADDITION ON ACCOU NT OF INVESTMENT OF RS.15,000/- IN NSCS AND OF RS. 5,000/- IN PPF ON 8TH FEB,1991, OUT OF WITHDRAWALS OF RS.45,000/- MADE ON 9 TH /10 TH JULY 1990, WAS HELD NOT CALLED FOR ONLY ON THE GRO UND OF TIME GAP. 9. IN ITO VS. PAWAN KUMAR, 153 ITD (DEL) 448, WHE RE THE ASSESSEE FAILED TO BRING ON RECORD THE NATURE OF TRANSACTIONS IN HIS B ANK ACCOUNT AND THE PURPOSE FOR WHICH THEY HAD BEEN ENTERED INTO, PEAK AMOUNT OF CR EDIT ENTRIES IN BANK ACCOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE AS INCOME F ROM UNDISCLOSED SOURCES. 10. IN CHETAN GUPTA VS. ACIT, 160 TTJ(DEL) 9, IT WAS HELD THAT: FROM THE EXPLANATION OF THE ENTRIES AND DEPARTMENT THEORY, I T EMERGES THAT THE ASSESSEE WAS WORKING AS THE FUND MANAGER OR ADMINISTRATOR FOR OT HERS. WHILE DEALING WITH THE ISSUE THIS FACT IS TO BE KEPT IN RECKONING. THE PRE SUMPTION UNDER S. 292C WILL NOT BE APPLICABLE IN THIS CASE AS ADMITTEDLY THERE WAS NO SEARCH PROCEEDINGS UNDER IT ACT ON THE ASSESSEE. HOWEVER, THE ASSESSEES CASE C OMES IN THE KEN OF S. 68 ABOUT GIVING REASONABLE EXPLANATION OF CASH CREDITS FOUND FROM HIS RECORD. THE PEAK CREDIT THEORY AND THE BENEFIT OF TELESCOPING IS GEN ERALLY ACCEPTED AS IT IS LOGICAL AND ACCEPTABLE, PROVIDED THERE IS REASONABLE MATERIAL T O SHOW THAT WITHDRAWALS OR REPAYMENTS COULD HAVE BEEN AVAILABLE ON THE DATE OF SUBSEQUENT CREDIT OR I.T.A NO.590/ASR/2016 7 REPAYMENT, MORE SO, IN THE ACCOUNTS OF DIFFERENT PE RSONS. FOR THE FACT THAT THE ASSESSEE HAS BEEN HELD TO BE A FUND MANAGER FOR 148 PERSONS, FOR WHICH, THE MONEYS ARE FREQUENTLY WITHDRAWN OR DEPOSITED, THE A SSESSEE WILL BE ENTITLED TO WORK OUT A PEAK CREDIT AND AVAIL THE BENEFITS OF TE LESCOPING. THE ASSESSEE HAS DISCHARGED ITS ONUS IN EXPLAINING THE ENTRIES BY FI LING THE DETAILS BEFORE THE AO, THE CIT(A) AND IN REMAND PROCEEDINGS. THE ASSESSEE HAS PUSHED THE BALL IN THE COURT OF THE DEPARTMENT BY DEMONSTRATING FROM THE DETAILS OF ENTRIES THAT HE MANAGES THE FUNDS FOR OTHERS. IN THE COURSE THEREOF, HE REQUEST S FOR NECESSARY WORKING OF PEAK CREDIT, CORRECTION OF MISTAKES, CONTRA ENTRIES AND CONSIDERING THE CLAIMS OF AVAILABLE OPENING BALANCES. THE CLAIM OF OPENING BA LANCES IS MADE AS THE DATE RECOVERED PERTAINS TO THREE YEARS AND THE ASSESSEE' S FUND MANAGING ACTIVITIES SPAN TO THREE YEARS. IN CONSIDERATION OF THE FOREGOING, THERE IS NO HESITATION TO HOLD THAT THE ASSESSEE HAS DISCHARGED HIS PRIMARY BURDEN IN E XPLAINING THE ENTRIES IN TERMS OF S. 68, OR ANY OTHER PRESUMPTION WHICH MAY BE RAISED IN BEHALF OF THE ENTRIES IN THE PRINT OUTS. THE DEPARTMENT, IN EFFECTIVE AND CONVIN CING TERMS, HAS FAILED TO REBUT THE SAME, EXCEPT GIVING SOME GENERAL OBSERVATIONS T HAT THE CLAIMS CANNOT BE CONSIDERED. I.T.A NO.590/ASR/2016 8 11. FROM THE ABOVE, IT IS EVIDENT THAT THE PEAK CRE DIT OF RS. 8,27,200/- WORKED OUT IS COVERED BY THE CASH PROFESSIONAL RECEIPTS AM OUNTING TO RS. 8,30,899/-, BENEFIT OF WHICH OUGHT TO HAVE BEEN ALLOWED BY THE AO. SO, THE ADDITION DESERVES TO BE DELETED. IT IS SO ORDERED. THE LD. CIT(A)S O RDER IS REVERSED. 12. THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2017. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 27 /03/2017 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER AR/SR.P.S./P.S.