Sri. Ranga Rao Kamineni, Bellary V. Income-Tax Officer, Bellary

ITA 910/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5268 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 21-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU
• Assessee Lawyers: B S BALACHANDER
• Keywords: Peak credit; Source of fund
• Section: 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 910/BANG/2017 ASSESSMENT YEAR : 2011-12 SHRI RANGARAO KAMINENI, FLAT NO. 209, TIRUMALA SAI RESIDENCY, MESS ROAD, COWL BAZAAR, BELLARY 583 103. PAN: APIPK 9496D VS. THE INCOME TAX OFFICER, WARD 2, BELLARY. APPELLANT RESPONDENT APPELLANT BY : SHRI B.S. BALACHANDER, ADVOCATE RESPONDENT BY : SHRI M.K. BIJU, JCIT DATE OF HEARING : 24.05.2017 DATE OF PRONOUNCEMENT : 07.06.2017 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER DATED 23.02.2017 OF CIT(A) FOR THE ASSESSMENT YEAR 2011-1 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: ITA NO. 910/BANG/2017 PAGE 2 OF 8 1.THE ORDER OF THE LOWER AUTHORITY IS CONTRARY TO L AW, EVIDENCES AND FACTS ON RECORD AND IS NOT MAINTAINABLE IN LAW IN SO FAR AS THE ADDITION OF RS. 13,00,000/- IS CONCERNED. 2.THE LEARNED LOWER AUTHORITIES ERRED IN MAKING AND CONFIRMING THE ADDITION OF RS. 13,00,000/- ON ASSUMPTIONS AND PRESUMPTIONS CONTRARY TO THE EVIDENCES ON RECORD. 3.THE LEARNED LOWER AUTHORITIES FAILED TO APPRECIAT E THE EVIDENCES AND LAW IN THE FACTS OF THE CASE IN THE RIGHT PERSP ECTIVE AS POINTED OUT IN THE CASE OF THE APPELLANT BEFORE HONORABLE ITAT UNDER STATEMENT OF FACTS. 4.THE ACTION OF THE ASSESSING OFFICER IS BAD IN LAW SINCE THE AO COULD HAVE CROSS VERIFIED THE CONFIRMING PARTY IN P ERSON IF HE HAD DOUBT ABOUT THE TRANSACTION THAT HAD TAKEN PLACE. 5.FOR THESE ARE ANY OTHER GROUNDS OF APPEAL THAT MA Y BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THIS HONORABL E TRIBUNAL MAY BE PLEASED TO ALLOW THIS APPEAL IN THE INTEREST OF EQUITY AND JUSTICE. 2. THE ONLY ISSUE ARISES FROM THE GROUNDS OF THE ASSES SEE IS REGARDING THE ADDITION MADE BY THE AO OF RS. 13 LAKHS ON ACCOUNT OF DEPOSITS MADE IN THE BANK ACCOUNT. WHILE COMPLETING THE ASSESSMENT U/S. 143(3) THE AO MADE AN ADDITION OF RS. 13 LAKHS AS UNEXPLAINED CAS H DEPOSITS IN THE BANK ACCOUNT OUT OF THE TOTAL DEPOSITS OF RS. 42,83,188/ -. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) B UT COULD NOT SUCCEED. 3. BEFORE THE TRIBUNAL, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT OUT OF RS. 42,83,188/- THE AO ACCEPTED THE SOURCE OF DEPOS IT TO THE EXTENT OF RS. 29,83,188/- AND REJECTED THE SOURCE OF THE BALA NCE AMOUNT OF RS. 13 LAKHS. HE HAS REFERRED TO THE CONFIRMATION FILED BY THE ASSESSEE REGARDING THE SOURCE OF RS. 13 LAKHS FROM HIS MOTHE R AND BROTHER AS THIS ITA NO. 910/BANG/2017 PAGE 3 OF 8 AMOUNT WAS PAID BY THE ASSESSEE TO THE OTHER FAMILY MEMBERS DURING THE YEAR 2004-05 AND WAS RECEIVED BACK BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE WANTED TO TAKE ANCESTRAL PROPERTY SITUATED AT KOPPERAPADU VIL LAGE, BALLIKURAVA MANDAL, PRAKASAM DISTRICT, ANDHRA PRADESH AND IT WA S AGREED AMONG THE FAMILY MEMBERS THAT THE ASSESSEE WOULD PURCHASE THE SAID ANCESTRAL PROPERTY FOR WHICH THE ASSESSEE PAID RS. 13 LAKHS D URING THE FINANCIAL YEAR 2004-05. SUBSEQUENTLY THE FATHER AND THE BROT HER OF THE ASSESSEE PASSED AWAY IN THE YEAR 2006 AND DUE TO THE EMPLOYM ENT REASONS THE ASSESSEE SHIFTED TO BELLARY. BECAUSE OF THE SUBSEQ UENT DEATH OF THE FAMILY MEMBERS AND THE ASSESSEE SETTLED DOWN AT BEL LARY THE ASSESSEE DECIDED TO PURCHASE THE RESIDENTIAL HOUSE AT BELLAR Y AND THEREFORE THE SAID AMOUNT WAS OF RS. 13 LAKHS WAS RECEIVED BACK. THE LD. AR HAS SUBMITTED THAT THE AO HAS REJECTED THE CONFIRMATION FILED BY THE ASSESSEE ON THE GROUND THAT THE STAMP PAPER USED FOR CONFIRMATION W AS PURCHASED ON 28.02.2014 WHEREAS THE AMOUNT WAS CLAIMED TO HAVE R ECEIVED DURING THE MONTH OF APRIL 2010. FURTHER THE ADVANCE WAS CLAIM ED TO HAVE BEEN GIVEN BY THE ASSESSEE DURING THE FINANCIAL YEAR 200 4-05 WHICH WAS RECEIVED BACK DURING THE FINANCIAL YEAR 2010-11. T HEREFORE THE GENUINENESS OF THE TRANSACTION WAS DOUBTED BY THE A O. THE LD. AR HAS REFERRED THE ASSESSMENT ORDER FOR THE ASSESSMENT YE AR 2010-11 PASSED U/S. 143(3) AND SUBMITTED THAT THE AO HAS ADMITTED THE A DVANCE OF ITA NO. 910/BANG/2017 PAGE 4 OF 8 RS. 13 LAKHS SHOWN BY THE ASSESSEE IN THE BALANCE S HEET. THEREFORE THE SAID ADVANCE RECEIVED BACK BY THE ASSESSEE IN THE A SSESSMENT YEAR 2011-12 CANNOT BE DISPUTED. 4. ALTERNATIVELY THE LD. AR HAS SUBMITTED THAT THE AO HAS TAKEN INTO CONSIDERATION THE ENTIRE DEPOSITS IN THE BANK ACCOU NT WITHOUT CONSIDERING THE PEAK CREDITS. HE HAS POINTED OUT THAT AS PER T HE BANK ACCOUNT STATEMENT THE PEAK CREDITS IN THREE BANKS COMES TO RS. 26,16,754/- OUT OF THE TOTAL DEPOSIT OF RS. 42,83,188/-. THE ASSESSIN G OFFICER HAS ACCEPTED THE SOURCE OF DEPOSIT OF RS. 29,83,188/- WHICH IS M ORE THAN THE PEAK CREDIT OF RS. 26,16,754/-. HENCE THE SOURCE EXPLAI NED BY THE ASSESSEE AND ACCEPTED BY THE AO IS MORE THAN THE PEAK CREDIT IN THE BANK ACCOUNT OF THE ASSESSEE. THEREFORE NO ADDITION IS WARRANTED. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE ONUS IS ON THE ASSESS EE TO DISCHARGE ITS RESPONSIBILITY TO PROVE THE SOURCE FOR MAKING CASH DEPOSIT IN THE BANK ACCOUNT WHICH HAS NOT BEEN DISCHARGED BY THE ASSESS EE AS NO PROOF WAS PRODUCED TO ESTABLISH THE SOURCE OF CASH DEPOSITS T O RS. 13 LAKHS. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO FOUND THAT THERE WAS A CASH DEPOSIT OF RS. 42,83,188/- IN THE BANK ACCOUNT AND ASKED THE ASSESSEE TO EXPLAIN THE SOURCE. THE ITA NO. 910/BANG/2017 PAGE 5 OF 8 ASSESSEE EXPLAINED THE SOURCE OF DEPOSITS AND ALSO PRODUCED THE EVIDENCE. THE AO ACCEPTED THE SOURCE OF DEPOSIT TO THE EXTENT OF RS. 29,83,188/- HOWEVER THE AO REJECTED THE SOURCE OF DEPOSIT TO TH E EXTENT OF RS. 13 LAKHS AS EXPLAINED BY THE ASSESSEE THROUGH C ONFIRMATION OF FAMILY MEMBERS THAT THE SAID AMOUNT WAS RECEIVED BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION WHICH WAS GIVEN AS AN ADVA NCE TO THE FAMILY MEMBERS TO PURCHASE THE ANCESTRAL PROPERTY. THIS A DVANCE OF RS. 13 LAKHS GIVEN TO THE FAMILY MEMBERS BY THE ASS ESSEE FOR PURCHASE OF ANCESTRAL PROPERTY HAS BEEN REFLECTED BY THE ASSESS EE IN THE BALANCE SHEET FOR THE YEAR 2010-11 AND THE ASSESSING OFFICER HAS ACCEPTED THE SAME WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 14 3(3) ON 28.03.2013. THE LD. AR OF THE ASSESSEE REFERRED TO THE STATEMEN T OF AFFAIRS WHEREIN THE AMOUNT OF RS. 13 LAKHS WAS SHOWN UNDER THE HEAD ASS ETS AND SUB HEAD ADVANCE FOR PROPERTY AT KOPPERAPADU VILLAGE, BALLIK URAVA MANDAL, PRAKASAM DISTRICT, ANDHRA PRADESH. IT IS FURTHER N OTED THAT THE ASSESSEE TO EXPLAIN THE SOURCE HAD FILED THE CONFIRMATION FROM THE FAMILY MEMBERS OF THE ASSESSEE BUT THE AO DOUBTED THE CONFIRMATION BY TREATING THE SAME AS A DOCUMENT OF SETTLEMENT BETWEEN THE FAMILY MEMBERS . WHEREAS IT WAS NOT A DOCUMENT OF RECORDING THE SETTLEMENT BETWEEN THE PARTIES BUT IT IS ONLY THE CONFIRMATION REDUCED IN WRITING BY THE FAM ILY MEMBERS ON A STAMP PAPER AND THEREFORE WHEN A STAMP PAPER WAS PU RCHASED AT THE TIME OF THE CONFIRMATION THEN THERE IS NO INFIRMITY IN T HE SAID DOCUMENT. THE ITA NO. 910/BANG/2017 PAGE 6 OF 8 REASON OF DOUBTING THE SAID EVIDENCE BY THE AO IS T HAT THIS DOCUMENT PERTAINS TO THE TRANSACTION OF GIVING ADVANCE BY TH E ASSESSEE TO THE FAMILY MEMBERS IN THE FINANCIAL YEAR 2004-05 AND THEREAFTE R RECEIVING THE SAME BACK IN THE FINANCIAL YEAR 2010-11 HAS BEEN WRITTEN ON A STAMP PAPER PURCHASED ON 28.02.2014. THUS IT IS CLEAR THAT THE AO HAS MISUNDERSTOOD THE DOCUMENT ITSELF CONTENTS OF WHICH CLEARLY EXPLA INS AND NARRATES BOTH INCIDENTS OF ADVANCE GIVEN BY THE ASSESSEE IN THE Y EAR 2004-05 AND THE SAME WAS REFUNDED TO THE ASSESSEE BY THE FAMILY MEM BERS IN THE FINANCIAL YEAR 2010-11. THE PURPOSE OF GIVING THIS CONFIRMATION IS ONLY FOR THE SATISFACTION OF THE TAXING AUTHORITY AND NO T FOR A PROOF OF SETTLEMENT TO THE FAMILY MEMBERS. ACCORDINGLY REJE CTING THE SAID CONFIRMATION AT THE THRESHOLD WITHOUT FURTHER EXAMI NATION AND VERIFICATION OF THE VERACITY OF THE CONFIRMATION BY CONDUCTING A PROPER ENQUIRY IS NOT JUSTIFIED ON THE PART OF THE AO. 6. FURTHER IT IS SETTLED PROPOSITION OF LAW THAT IN CA SE OF DEPOSITS IN BANK THE CORRESPONDING WITHDRAWAL FOR SUBSEQUENT DEPOSITS CA N BE CONSIDERED AS A PROPER SOURCE OF FUND IN THE HAND OF THE ASSESSEE. THEREFORE IN CASE WHETHER THERE ARE MULTIPLE TRANSACTION OF DEPOSIT A ND WITHDRAWAL ON REGULAR BASIS THEN ONLY PEAK CREDIT CAN BE CONSIDER ED FOR THE PURPOSE OF MAKING ADDITION ON THIS ACCOUNT. THE HONBLE ALLAH ABAD HIGH COURT IN ITA NO. 910/BANG/2017 PAGE 7 OF 8 CASE OF CIT VS SHARRAF TRADING CO. (376 ITR 534) HA S HELD IN PARA 30 AND 31 AS UNDER. 30. WE MAY ALSO NOTICE THAT AGAINST TRIBUNAL'S EARLIER ORDER DATED 13TH FEBRUARY, 2004, DEPARTMENT FILED APPEAL UNDER SECTION 260A BEFORE THIS COURT. WE ARE INFORMED THA T THESE APPEALS PREFERRED BY DEPARTMENT HAVE ALSO BEEN DISM ISSED BY THIS COURT. THESE APPEALS I.E. ITA NO. 179/2004 AND OTHER CONNECTED APPEALS HAVE BEEN DISMISSED BY A DIVISION BENCH VIDE JUDGMENT DATED 13TH DECEMBER, 2013. THEREIN TH E COURT IN PARAGRAPHS NO. 14 AND 15 HAS SAID : '14. REGARDING THE PEAK THEORY, IT MAY BE MENTIONED THAT THE PEAK THEORY WAS DEFINED IN THE SAMPATH IYENGAR'S LA W OF INCOME-TAX, VOL. 3, 9TH EDITION, PAGE 3547. ACCORDI NGLY, 'PEAK CREDIT' THEORY - ONE OF THE COMMONEST DEFECTS OF AN ASSESSEE, WHERE A SINGLE CREDIT OR NUMBER OF CREDIT S APPEAR IN THE BOOKS IN THE ACCOUNT OF ANY PARTICULAR PERSO N SIDE BY SIDE WITH A NUMBER OF DEBITS IS THAT THEY SHOULD AL L BE ARRANGED IN SERIAL ORDER, THAT A CREDIT FOLLOWING A DEBIT ENTRY SHOULD BE TREATED AS REFERABLE TO THE LATTER TO THE EXTENT POSSIBLE AND THAT, NOT THE AGGREGATE BUT ONLY THE ' PEAK' OF THE CREDIT SHOULD TREATED AS OWN EXPLAINED. TO GIVE A S IMPLE EXAMPLE, SUPPOSE THERE ARE CREDITS IN THE ASESSEE'S BOOK IN THE ACCOUNT. AS OR RS.5,000 EACH ON 1ST OCTOBER, 19 90 AND AGAIN ON 5TH NOVEMBER, 1990 BUT THERE IS A DEBIT BY WAY OF REPAYMENT SHOWN ON 27TH OCTOBER, 1990, THE EXPLANAT ION WILL BE THAT THE CREDIT APPEARING ON 5TH NOVEMBER, 1981 HAS OR COULD HAVE COME OUT OF THE WITHDRAWAL/REPAYMENT ON 27TH OCTOBER, 1981. THIS PLEA IS GENERALLY ACCEPTED AS I T IS LOGICAL AND ACCEPTABLE (WHETHER THE CREDITOR IS A GENUINE P ARTY OR NOT), PROVIDED THERE IS NOTHING IN THE MATERIAL ON RECORD TO SHOW THAT A PARTICULAR WITHDRAWAL/REPAYMENT COULD N OT HAVE BEEN AVAILABLE ON THE DATE OF THE SUBSEQUENT CREDIT . 15. A REFINEMENT OR EXTENSION OF THE PLEA OCCURS WH ERE THE CREDITS APPEAR NOT IN THE SAME ACCOUNT BUT IN THE A CCOUNTS OF DIFFERENT PERSONS. EVEN THEN, IF THE GENUINENESS OF ALL THE PERSON IS DISBELIEVED AND ALL THE CREDITS APPEARING IN THE DIFFERENT ACCOUNT ARE HELD TO BE THE ASSESSEE'S OWN MONEYS, THE ASSESSEE WILL BE ENTITLED TO SET OFF AND A DETE RMINATION OF THE PEAK CREDIT AFTER ARRANGING ALL THE CREDITS IN THE CHRONOLOGICAL ORDER.' 31. IN VIEW OF DISCUSSION MADE AND PROPOSITION OF LAW REFERRED, THE QUESTIONS AFORESAID ARE ANSWERED AGAI NST REVENUE. ITA NO. 910/BANG/2017 PAGE 8 OF 8 ACCORDINGLY WHEN THE AO HAS ACCEPTED THE SOURCE OF DEPOSIT TO THE EXTENT OF RS. 29,83,188/- WHICH IS LESS THAN THE PEAK CRED ITS OF RS. 26,16,754/- AS EXPLAINED AND WORKING GIVEN BY THE ASSESSEE THEN NO ADDITION IS CALLED FOR ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNT OF T HE ASSESSEE. 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AS WEL L AS THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF CIT VS SHAR RAF TRADING CO. (SUPRA) THE ADDITION MADE BY THE AO IS DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 9. PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DAY OF JUNE, 2017 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DATED, THE 07 TH JUNE, 2017. / MS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.