Sh. Vineet Kumar, New Delhi V. ITO, New Delhi

ITA 6693/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7258 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAPIL GOEL ADV SHRI AMIT JAIN
• Keywords: Unexplained cash credit; Unexplained investment; Peak credit
• Section: 68

Judgement Text

ITA NO. 6693/DEL/2013 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI H S SIDHU JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.:- 6693/DEL /2013 ASSESSMENT YEAR: 2009-10 VINEET KUMAR C/O KAPIL GOEL, ADV., A-1/25, SECTOR-15, ROHINI, NEW DELHI 110 085 PAN AAAPK9160B VS. ITO WARD-33(2) NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER O.P. KANT, A. M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AG AINST ORDER DATED 18/11/2013 OF LD. COMMISSIONER OF INCOME-TAX (APPEA LS),XXVI, NEW DELHI FOR ASSESSMENT YEAR 2009-10, RAISING FOLLOWIN G GROUNDS: ASSESSEE BY : SHRI KAPIL GOEL, ADV. DEPARTMENT BY: SHRI AMIT JAIN, SR. DR DATE OF HEARING 18 /05 /2016 DATE OF PRONOUNCEMENT 27 /06/2016 ITA NO. 6693/DEL/2013 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN GIVING CONTRADICTORY FINDING BY HOLDING AT PAGE 9 OF HIS ORDER THAT A. ASSESSEES TRANSACTIONS REPRESENT SALE CONSIDERATIO N OF UNDISCLOSED BUSINESS TRANSACTIONS IN SUBJECT BANK A/ C AND THEN NOT APPLYING PROVISIONS OF SECTION 44AF (5% PR OFIT RATE) TO TOTAL TURNOVER WHERE DISCLOSED/ACCEPTED TU RNOVER AND UNDISCLOSED TURNOVER FROM SUBJECT BANK A/C IS R S. 35,43,434/- (WELL BELOW SPECIFIED CAP OF RS. 40,00, 000); B. AND INSTEAD ERRONEOUSLY COMPUTING INCOME AT RS. 714 ,738 ON BASIS OF PERVERSE FINDINGS AT PAGE 10(PARA 6.4) (BY THIS ADDITION WHICH CAN BE SUSTAINED IS RS. 14, 071/-) 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING AT PAGE 9 PARA 6.3 THAT CITED PRECEDENTS DO NOT MATCH ASSESSEES FACTS WHER E ALL THE PRECEDENTS CITED ARE SQUARELY APPLICABLE TO APPELLA NTS CASE SPECIALLY P & H HIGH COURT ORDER AT 242 CTR 61 & AL LAHABAD HIGH COURT ORDER AT PAGE 207 TAXMAN 332 AND ALL PRE CEDENTS CITED ADVANCES APPELLANTS CASE FOR TAXATION ON PROF IT/DEEMED PROFIT RATE AS PER PRESUMPTIVE SCHEME U/S 44AF OF T HE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN NOT GIVING THE ALTERNAT E RELIEF OF PEAK THEORY FULLY APPLICABLE TO APPELLANTS FACTS AS HIGHLIGHTED IN PARA 3 OF OUR SUBMISSION ADDRESSED TO LD. CIT(A) REPRODUCED AT PAGE 5 OF HIS ORDER (PEAK ADDITION RS . 236,587/-) 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN GIVING ADVERSE DIRECTIO NS AT PARA 6.6 FOR PASSING TO OTHER AUTHORITIES I) WITHOUT SHO W CAUSING ASSESSEE ON THE SAME AND II) ALSO IT IS OUTSIDE THE PURVIEW OF POWERS OF LD. CIT(A) U/S 250/251 OF THE ACT WHICH A RE PREYED TO THE EXPUNGED. ITA NO. 6693/DEL/2013 3 RELIEF CLAIMED I) TO DELETE THE ADDITION SUSTAINED AT RS. 714,738 /- FROM BANK DEPOSITS OF RS. 21,25,620/- AND TO SUSTAIN THE ADDITION AT RS. 14,071/-; II) TO APPLY PEAK THEORY FOR MAXIMUM ADDITION SUSTAINABLE AT RS. 236,587/- III) TO EXPUNGE ADVERSE DIRECTIONS WITHOUT FOLLOWING AUDI ALTREM PARTEM; IV) ANY OTHER RELIEF AS DEEMED FIT AND APPROPRIATE IN FACTS AND CIRCUMSTANCES OF THE CASE THAT THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, M ODIFY, RESCIND, SUPPLEMENT OR ALTER ANY OF THE GROUNDS STA TED HEREIN ABOVE, EITHER BEFORE OR AT THE TIME OF HEARI NG OF THIS APPEAL. 2. THE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, WAS THE PROPRIETOR OF M/S LAXMI BEARING DURING THE RELEVANT PERIOD OF TIME AND FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 18/03/2010 DECLARING INCOME OF RS.1,48,517/-. THE C ASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. IN THE CASE OF ASSESSEE, AN INFORMATION OF DEPOSIT OF RS. 21,25,620/- IN BANK ACCOUNT WITH IDB I BANK, NEW DELHI WAS RECEIVED FROM THE ANNUAL INFORMATION RETURN (AI R) AND IN THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE WAS AS KED TO EXPLAIN THE SOURCE OF THE SAID DEPOSITS. THE ASSESSEE EXPLAINED THAT THE DEPOSITS REPRESENT TRADING RECEIPT OF BUSINESS OF SALE OF AU TOMOBILES PARTS AND COULD NOT BE DECLARED THE SAME BY OVERSIGHT, HOWEVE R ON BEING ASKED ITA NO. 6693/DEL/2013 4 BY THE ASSESSING OFFICER TO PRODUCE SALE/PURCHASE B ILLS IN SUPPORT OF HIS CONTENTION, HE FAILED TO DO SO. THE ASSESSING OFFIC ER OBSERVED THAT THIS BANK ACCOUNT WAS IN OPERATION SINCE FINANCIAL YEAR 2007 08 RELEVANT TO PRECEDING ASSESSMENT YEAR, AND THEREFORE ACCORDING TO HIM IT COULD NOT HAVE BEEN POSSIBLE TO LEAVE THE TRADING RECEIPT FRO M ADDING IN REGULAR PROFIT AND LOSS ACCOUNT DUE TO OVERSIGHT. IN VIEW O F FAILURE ON THE PART OF THE ASSESSEE TO SUPPORT THE DEPOSITS WITH PURCHASE AND SALE BILLS, THE ASSESSING OFFICER HELD THE ENTIRE DEPOSIT OF RS. 21 ,25,620/- AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INC OME-TAX ACT ,1961 (IN SHORT THE ACT). ON APPEAL, THE LD. COMMISSIO NER OF INCOME-TAX (APPEALS), REDUCED THE ADDITION TO RS.7,14,738/- FO LLOWING THE ASSET EXPENDITURE BASIS. AGGRIEVED, THE ASSESSEE IS IN AP PEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS REPRODUCED ABOVE. 3. AT THE OUTSET, THE LD. AUTHORISED REPRESENT ATIVE, SUBMITTED NOT TO PRESS GROUNDS NO. 1 AND 2 OF THE APPEAL AND THEREFO RE BOTH THE GROUNDS ARE DISMISSED AS INFRUCTUOUS. 4. IN GROUND NO. 3, THE ASSESSEE RAISED THE I SSUE OF NOT ACCEPTING THE PEAK THEORY BY THE LD. COMMISSIONER OF INCOME-T AX( APPEALS). ITA NO. 6693/DEL/2013 5 5. BEFORE US LD. AUTHORISED REPRESENTATIVE OF T HE ASSESSEE SUBMITTED THAT DEPOSITS MADE IN BANK ACCOUNT WERE SUBSEQUENTL Y WITHDRAWN AND REDEPOSITED AND PEAK OF SUCH DEPOSITS WORKED OUT TO BE RS. 2,36,587/-, SHOULD ONLY BE ADDED AS UNEXPLAI NED CASH CREDIT UNDER SECTION 68 OF THE ACT AND NOT THE ENTIRE DEPO SITS OF RS. 21,25,620/-. IN SUPPORT OF HIS CONTENTION, THE LD. AR RELIED ON THE DECISION OF THE TRIBUNAL DELHI BENCH IN THE CASE OF RAJEEV KHURANA IN ITA NO. 2906/DEL/2013 PRONOUNCED ON 27/03/2015 AND JUDGEMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF COMM ISSIONER OF INCOME TAX VERSUS INDERPAL CHAWLA IN ITA 1424/2010 PRONOUN CED ON 24/09/2010. 6. IN REPLY TO THE ABOVE, THE LD. SENIOR DEPAR TMENTAL REPRESENTATIVE (SR DR) RELYING ON THE ORDERS OF THE AUTHORITIES BE LOW SUBMITTED THAT THE PEAK THEORY WAS NOT APPLICABLE TO THE FACTS OF THE CASE AS THE ASSESSEE HIMSELF HAS ACCEPTED THE DEPOSITS AS TRAD ING RECEIPTS, WHICH WERE DEPOSITED IN DIFFERENT CITIES IN INDIA AND WIT HDRAWN FROM DELHI AND THEREFORE IT WAS NOT POSSIBLE FOR THE ASSESSEE TO S END WITHDRAWN MONEY TO DIFFERENT CITIES FOR REDEPOSIT. ACCORDING TO HIM , THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ADOPTED THE BEST METHOD FOR SUSTAINING THE ITA NO. 6693/DEL/2013 6 ADDITION IN THE CIRCUMSTANCES OF THE CASE AS THE AS SESSEE WAS ENGAGED IN PARALLEL BUSINESS ACTIVITY NOT RECORDED IN REGUL AR BOOKS OF ACCOUNTS. 7. WE HAVE HEARD THE RIVAL SUBMISSION AND PER USED THE MATERIAL ON RECORD. IN THE GROUND RAISED THE ASSESSEE HAS SOUGH T THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) SHOULD HAVE AD OPTED PEAK THEORY FOR SUSTAINING THE ADDITION. THE LD. COMMISS IONER OF INCOME TAX APPEALS, IN THE IMPUGNED ORDER HAS GIVEN DETAILED R EASONING AS WHY THE THEORY OF PEAK CREDIT WAS NOT APPLICABLE TO THE FAC TS OF THE ASSESSEE. THE RELEVANT PARA OF THE IMPUGNED ORDER IS REPRODUC ED AS UNDER: 6.2. I HAVE PERUSED THE IDBI BANK ACCOUNT WHERE TH E DEPOSITS AGGREGATING TO RS. 21,25,620/- HAVE BEEN MADE. ALMO ST ALL DEPOSITS ARE OUTSTATION DEPOSITS; VIZ: UJJAIN, GONDI A, VARANSI, LUCKNOW, BILASPUR, HYDERABAD, AMRAWATI,HUBLI, RAJSAM AND, DIMAPUR, KOZHIKODE, ETC. AND 'ALMOST ALL WITHDRAWAL S ARE IN CASH IN DELHI THROUGH CHEQUES. THE LD. COUNSEL CONTENDED THAT THE DEPOSITS ARE MADE BY THE OUTSTATION BUYERS OF 'BEAR INGS' TO WHOM THE SALE HAVE BEEN MADE BY THE APPELLANT. I HAVE AN ALYZED THE ENTIRE ISSUE IN-DEPTH. THE ADDITION OF PEAK CREDIT IN THE BANK ACCOUNT CAN ONLY BE MADE WHEN IT IS ESTABLISHED THA T THE OUTGOINGS ARE BEING BROUGHT IN BACK TO MAKE RE-DEPO SIT IN THE BANK. WHERE THE CYCLE OF DEPOSITS AND WITHDRAWALS A RE NOT QUESTIONABLE, ONLY THE PEAK CREDIT IN THE BANK ACCO UNT IS ASSESSABLE AS INCOME HAS BEEN HELD IN THE ABOVE MEN TIONED CASES RELIED UPON BY THE. LD. COUNSEL. HOWEVER, IT IS NOT A CASE HERE BECAUSE NO PRUDENT BUSINESS MAN WILL MAKE WITHDRAWA LS IN CASH IN DELHI AND SEND IT TO FAR PLACES ACROSS INDIA TO RED EPOSIT IT IN PIECEMEAL IN THE BANK ACCOUNT. FURTHER, IT IS NOT T HE CLAIM OF THE APPELLANT THAT THE WITHDRAWALS FROM THE BANK ACCOUN T ARE UTILIZED FOR RE-DEPOSITING IN BANK. THUS, IN SUCH A SITUATIO N, I DO NOT SUBSCRIBE THE THEORY OF THE PEAK CREDIT IN THE BANK ACCOUNT AS ITA NO. 6693/DEL/2013 7 ASSESSABLE INCOME. THE NOTABLE FEATURE OF THE BANK ACCOUNT IS THAT THE DEPOSITS ARE SMALL AND NUMEROUS AS COMPARED TO WITHDRAWALS. THE DEPOSITS IN CASH VARY FROM RS.5,000/- TO RS.49, 000/-. FURTHER, THE AO HAS NOT BROUGHT ANY MATERIAL ON THE RECORD, WHICH MAY SUBSTANTIATE HIS FINDINGS THAT THE ENTIRE DEPOSITS ARE INCOME. THUS, IN VIEW OF ABOVE FACTS AND THE SUBMISSION OF THE AP PELLANT, L AM INCLINED TO AGREE WITH THE CONTENTION OF THE LD. CO UNSEL THAT THE DEPOSITS AND WITHDRAWALS IN THE IDBI BANK ACCOUNT. ARE BUSINESS TRANSACTIONS. HERE, THE DEPOSITS IN THE BANK ACCOUN T APPEAR SALE CONSIDERATION AND THE ENTIRE UNDISCLOSED BUSIN ESS TRANSACTIONS ARE IN CASH. 8. WE AGREE WITH THE FINDING OF THE LD. COMMI SSIONER OF INCOME-TAX (APPEALS) AS DEPOSITS MADE AT DIFFERENT STATIONS LI KE UJJAIN, GONDIA, VARANASI ETC AND THE WITHDRAWALS WERE MADE FROM DEL HI AND THE ASSESSEE ITSELF HAS ACCEPTED THAT THE DEPOSITS WERE TRADING RECEIPTS FROM SALE OF AUTOMOBILES PARTS AND WITHDRAWALS WERE TOWA RDS PURCHASES THEN IN SUCH CIRCUMSTANCES, THE WITHDRAWALS ARE NOT UTIL ISED FOR REDEPOSITS AND THEREFORE PEAK THEORY OF CREDIT CANNOT BE APPLI ED TO THE FACTS OF THE CASE. IN THE CASE OF SHRI RAJEEV KHURANA (SUPRA) CI TED BY THE LD. AR, THE WITHDRAWALS FROM BANK ACCOUNT CONSTITUTED THE S OURCE OF DEPOSITS THEREIN AND SOURCE OF DEPOSIT WAS NOT FROM TRADING RECEIPTS, THUS FACTS OF THE CASE ARE DISTINGUISHABLE. IN THE CASE OF IND ERPAL CHAWLA (SUPRA) ALSO THE AO DIDNT MAKE ANY ADVERSE FINDING WITH RE GARD TO DEPOSIT IN REMAND PROCEEDINGS, THE FACTS OF THE CASE DISTINGUI SHABLE FROM THAT OF THE CASE IN HAND. THE LD. COMMISSIONER OF INCOME-T AX (APPEALS) HAS ITA NO. 6693/DEL/2013 8 APPLIED THE ASSET EXPENDITURE THEORY FOR SUSTAINING THE ADDITION. THE RELEVANT PARAS OF THE IMPUGNED ORDER IN THIS REGARD ARE AS UNDER: 6.4. I HAVE PERUSED THE P & - L ACCOUNT AND THE BA LANCE SHEET OF THE APPELLANT FILED BEFORE THE AO. ACCORDING TO WHI CH, THE SALES, CLOSING STOCK AND DEBTORS ARE RS. 14,17,814/-, RS. 3,42,000/- AND RS. 1,30,120/- RESPECTIVELY. THIS FACT INDICATES TH AT THE ENTIRE SALE CONSIDERATION IS NOT REALIZED WITHIN THE YEAR AND T HE APPELLANT IS BOUND TO HAVE CERTAIN STOCK IN TRADE AND DEBTORS IN HIS BUSINESS. SIMILARLY, THE APPELLANT IS BOUND TO HAVE STOCK IN TRADE AND DEBTORS IN RESPECT OF HIS UNDISCLOSED/UNACCOUNTED BUSINESS. TAKING THE CLUE EMERGED FROM THE ABOVE DETAILS OF ACCOUNTED BU SINESS; I AM OF THE CONSIDERED VIEW THAT THE APPELLANT IS BOUND TO HAVE CLOSING STOCK AND DEBTORS IN RESPECT OF HIS UNACCOUNTED BUS INESS WHOSE ADMITTED TURNOVER IS RS. 21,25,620/-. AS PER THE BO OKS OF ACCOUNT, THE RATIO OF CLOSING STOCK PLUS DEBTORS TO THE SALE S IS 33.33% (CLOSING STOCK OF RS. 3,42,000/- PLUS DEBTORS OF RS . 1,30,120/- DIVIDED BY RS. 14,17,814/-). APPLYING THIS RATIO TO THE ADMITTED UNDISCLOSED SALES OF RS. 21,25,620/-, THE UNEXPLAIN ED INVESTMENT IN BUSINESS, IN RESPECT OF CLOSING STOCK AND DEBTO RS, WORKS OUT TO RS. 7,07,813/-, WHICH DOES NOT GET REFLECTED FROM T HE UNDISCLOSED BANK ACCOUNT. THE CASH DEPOSITS IN THE IDBI BANK AC COUNT ONLY REFLECT THE REALIZED SALES IN CASH AND NOT THE STOC K AND DEBTORS. SINCE THE APPELLANT HAS NOT BEEN SEARCHED, THEREFOR E, THERE IS NO DETAIL IN RESPECT OF UNDISCLOSED ASSETS IN ANY FORM . 6.5 THE INCOME OF THE APPELLANT HAS TO BE WORKED OU T ON ACCRUAL BASIS OR ASSET-EXPENDITURE .BASIS AND HIGHER OF THE SE TWO HAS TO BE ASSESSED TO AVOID DOUBLE TAXATION AS THE INCOME ON ACCRUAL/RECEIPT BASIS, LATER ON, GETS APPROPRIATED / MANIFESTED / EXPENDED IN ASSETS AND OR EXPENDITURE. PRESUMING TH AT THE APPELLANT HAS UTILIZED HIS BUSINESS ESTABLISHMENT T O RUN THE UNDISCLOSED BUSINESS ALSO, THEN IN SUCH A SITUATION , HE IS BOUND TO HAVE THE STOCK IN TRADE AND DEBTORS AS UNDISCLOSED ASSETS OF HIS UNDISCLOSED/UNACCOUNTED BUSINESS. THE AGGREGATE OF UNEXPLAINED INVESTMENT OF RS.7,07,813/- IN CLOSING STOCK & DEBT ORS IN THE UNDISCLOSED/UNACCOUNTED BUSINESS AND INCREASE OF RS . 6,925/- (BALANCE OF RS. 60,985/- AS ON 31.03.2009 MINUS RS. 54,060/- BALANCE AS ON 01.04.2008) IN THE BANK BALANCE OF ID BI BANK ITA NO. 6693/DEL/2013 9 ACCOUNT, WHICH WORKS OUT TO RS. 7,14,738/- IS THE I NCOME OF THE APPELLANT ON ASSET-EXPENDITURE BASIS. ALTERNATIVELY , FOLLOWING THE GROSS PROFIT (GP) RATE AS PER THE BOOKS OF ACCOUNT OF THE APPELLANT, THE GROSS PROFIT ON ADMITTED UNDISCLOSED SALES OF R S. 21,25,620/- IS WORKED OUT TO RS. 3,53,269/-, WHICH IS INCOME ON AC CRUAL/RECEIPT BASIS. SINCE THE INCOME OF THE APPELLANT WORKED OUT ASSET- EXPENDITURE BASIS IS HIGHER THAN THE INCOME ON ACCR UAL/RECEIPT BASIS, THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANTS INCOME FROM ADMITTED UNACCOUNTED/UNDISCLOSED BUSINE SS IS RS. 7,14,738/-, WHICH REQUIRES TO BE ASSESSED OVER AND ABOVE THE INCOME SHOWN IN THE ROI. 9. WHEN THE ASSESEE IS ENGAGED IN PARALLEL BUSINESS ACTIVITY, SOME CLOSING STOCK MAY REMAIN IN HAND AND SIMILARLY SOME DEBTORS MAY ALSO BE PENDING FOR RECOVERY, THUS IN SUCH CIRCUMSTANCES PEAK OF THE BANK ACCOUNT WILL NOT REFLECT THE TRUE INCOME BECAUSE ON THE DATE OF PEAK CREDIT SOME WITHDRAWALS AND SOME SALES ARE OUTSIDE THE PEAK CREDIT. IN OUR VIEW, THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS) HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE OF ADOPTING PEAK THEORY FOR CONSIDERING UNEXPLAINED CREDIT. WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE LD. COMMISSIONER OF INCOME-TAX (APPE ALS) ON THE ISSUE IN DISPUTE, AND ACCORDINGLY THE GROUND OF THE APPEAL I S DISMISSED. 10. THE GROUND NO. 4 OF THE APPEAL WAS ALSO NO T PRESSED BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND THERE FORE SAME IS DISMISSED AS INFRUCTUOUS. ITA NO. 6693/DEL/2013 10 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/06/2016. SD/- SD/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27/06/2016 VEENA VEENA VEENA VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI