New Laxmi Steel & Power Pvt. Limited, Bhubaneswar V. ACIT, Central Circle-1, Bhubaneswar

ITSSA 01/CTK/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0917 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 09-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Assessee Lawyers: KAMAL AGARWALLA
• Keywords: Income from undisclosed sources; Search and seizure; Loose papers; Peak credit
• Section: 201

Judgement Text

P A G E 1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT (SS) A NO . 01 /CTK/201 9 ASSESSMENT YEAR : 201 5 - 201 6 NEW LAXMI STEEL & POWER PVT LTD., FLAT NO.M/61, MADHUSUDAN NAGAR, UNIT - IV, BHUBANESWAR. VS. ACIT, CENTRAL CIRCLE - 1, BHUBANESWAR PAN/GIR NO. AACCN 7722 K (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI KAMAL AGARWALLA, CA REVENUE BY : SHRI M.K.GAUTAM, CIT DR DATE OF HEARING : 19 / 0 3 / 20 20 DATE OF PRONOUNCEMENT : 8 / 0 6 /20 20 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), 2 , BHUBANESWAR DATED 28.11.2018 FOR THE ASSESSMENT YEAR 2015 - 16 . 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,79,06,477/ - MADE BY THE AO IGNORING THE PEAK CREDIT THEORY CONCEPT. 3. LD A.R. SUBMITTED THAT A SEARCH AND SEIZURE OP ERATION WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 24.11.2015 AND DURING THE COURSE OF SEARCH PROCEEDINGS, BASED ON CERTAIN BANK ACCOUNTS IN THE NAME OF SHRI UMA CHARAN PANDA MAINTAINED WITH ICICI BANK FOUND FROM THE PREMISES OF THE ASSESSEE AND THE ASSESSING OFFICER MADE ADDITION BASED ON SUCH BANK ACCOUNT. LD A.R. SUBMITTED THAT FROM THE BANK ACCOUNT, IT IS AMPLE CLEAR THAT FROM SEPTEMBER, 2014 IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 2 | 8 TO JANUARY, 2015, NUMBER OF TRANSACTION OF CASH INCLUDING CASH WITHDRAWALS AND DEPOSITS HAVE BEEN MADE, W HEREIN, TOTAL AMOUNT OF DEPOSIT WAS RS.1,79,06,477/ - AND EQUIVALENT AMOUNT OF CASH WAS ALSO WITHDRAWN. LD A.R. SUBMITTED THAT IN A CASE WHERE THERE ARE CONTINUOUS DEPOSITS AND WITHDRAWALS IN THE SAME BANK ACCOUNT BY THE ASSESSEE OR ON BEHALF OF THE ASSESS EE BY HIS AUTHORISED REPRESENTATIVE OR EMPLOYEE THEN PEAK CREDIT CAN BE TAXED AS UNDISCLOSED INCOME OF THE ASSESSEE. LD A.R. STRENUOUSLY CONTENDED THAT THE PEAK CREDIT THEORY HAS BEEN EVOLVED IN ON THE PRINCIPLE OF AVOIDING DOUBLE TAXATION FOR THE SAME S OURCE OF INCOME AS WHEN THE AMOUNT IS REGULARLY DEPOSITED AND WITHDRAWN BY THE ASSESSEE OR ON HIS BEHALF THEN THE ENTIRE AMOUNT OF DEPOSITS CANNOT BE TAKEN AS UNDISCLOSED INCOME OF THE ASSESSEE BECAUSE AMOUNT OF WITHDRAWAL IS ALSO USED FOR REDEPOSITING TO THE SAME BANK ACCOUNT. 4. LD A.R. FURTHER SUBMITTED THAT IN CONSEQUENT TO SEARCH, THE ASSESSEE HAS DISCLOSED RS.15 CRORES AS UNDISCLOSED INCOME AND BECAUSE OF RESTRICTIONS ON WITHDRAWAL AT OUTSTATION BRANCH, THE ASSESSEE HAS TO CARRY THE CASH FOR PURCHASE OF SCRAPS FROM KABADDI WALAS FOR MAKING PAYMENTS IN CASH LOCATED IN THE DIFFERENT PART OF THE STATE. LD A.R. SUBMITTED THAT THE CASH WAS CARRIED BY THE EMPLOYEE OF THE ASSESSEE SHRI U.C.PANDA AND AFTER MAKING PAYMENT TO KAWADI WALAS TOWARDS PURCHASE OF SCRAPS, REMAINING AMOUNT WAS DEPOSITED IN CASH ON THE DIFFERENT PARTS OF THE STATE AND THE AMOUNT SO DEPOS ITED ON BEHALF OF THE ASSESSEE WAS WITHDRAWN BY THE ASSESSEE HIMSELF, THEREFORE, ENTIRE CA SH DEPOSIT SHOULD NOT BE CONSIDERED AS UNACCOUNTED OR UNDISCLOSED INCOME OF THE ASSESSEE. LD A.R. SUBMITTED THAT DURING SEARCH AND SEIZURE OPERATION, NOT A SINGLE IN CRIMINATING MATERIAL OTHER THAN BANK STATEMENT FROM WHICH THE FACTUM OF CASH DEPOSIT AS WELL IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 3 | 8 AS CASH WITHDRAWN WAS REVEALED, THEREFORE, THE ENTIRE ON THE BASIS OF ONLY BANK STATEMENT MAY KINDLY BE DELETED. 5. ALTERNATIVELY, HE SUBMITTED THAT SINCE CASH D EPOSITS AND CASH WITHDRAWALS HAVE BEEN REGULARLY DONE BY THE ASSESSEE IN THE SAME BANK ACCOUNT, THEREFORE, CONSIDERING THESE FACTS AND CIRCUMSTANCES OF THE CASE, THE TOTAL ADDITION MAY KINDLY BE RESTRICTED TO PEAK AMOUNT. 6. LD A.R. ALSO PLACED RELIANCE ON THE DECISION OF HONBLE A.P.HIGH COURT IN THE CASE OF CIT VS PURUSHOTTAM JHAWAR (2013) 220 TAXMAN 74 (MAG) (AP). LD A.R. ALSO SUBMITTED THAT IF THE ASSESSEES CLAIM OF INCOME BY APPLYING PEAK THEORY IS ACCEPTED AND SAME IS SUBMITTED BEFORE THE AO THEN WH ILE PASSING THE ASSESSMENT ORDER, THE AO HAS TO GIVE VALID REASONS ON REFUSAL WITHOUT APPLYING THE PRINCIPLES OF PRESUMPTIONS AND MORE PARTICULARLY IN THE CASE OF SEARCH ASSESSMENT. LD A.R. VEHEMENTLY CONTENDED THAT THE AO HAS TO ESTABLISH HIS CONTENTION BY MAKING FURTHER INQUIRIES AND WHEN THIS IS NOT DONE, THE SEIZED DOCUMENT IS DUMB DOCUMENT AND NO ADDITION CAN BE MADE MERELY ON PRESUMPTION & SURMISE. LD A.R. FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS D.K. GUPTA (2009) 174 TAXMAN 476 (DEL) AND SUBMITTED THAT NO PRE SUMPTION CAN BE RAISED PARTICULARLY WHEN THE ASSESSEE HAS OFFERED HIS EXPLANATION AND THE PRESUMPTION MADE BY THE AO SHOULD BE BACKED BY DIRECT & CORROBORATIVE EVIDENCE THAT THE DEPOSITS HAD MATERI ALISED INTO INCOME. LD A.R. LASTLY SUBMITTED THAT FOR APPLICATION OF PEAK CREDIT THEORY, THE ASSESSEE SHOULD FIRST OWN UP ALL THE DEBITS AND CREDITS BEFORE ARGUING AND PRESSING INTO SERVICE IN THE SAID PEAK CREDIT THEORY TO WORK OUT THE INCOMES. LD A.R. HAS PLACED RELIANCE ON IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 4 | 8 THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI VS CIT (2005) 276 ITR 38 (ALL) AND SUBMITTED THAT BEFORE ASSUMING THAT THE ENTIRE DEPOSITS AS PROFIT EARNED, HE HAS TO ESTABLISH THE SAME BY FINDING O UT THE RELATED TRANSACTIONS OF SALES & PURCHASES OUT OF SEIZED MATERIALS OR OTHERWISE. IN THE PRESENT CASE, THE AO HAS NOT FOUND ANY SINGLE EVIDENCE IN THE CASH DEPOSITS BEING PROFIT ELEMENT OF THE UNACCOUNTED SALES. THEREFORE, THE ENTIRE AMOUNT OF CASH DEPOSITS CANNOT BE TAXED TREATING THE SAME AS UNDISCLOSED INCOME OR UNDISCLOSED PROFIT OF THE ASSESSEE. 7. REPLYING TO ABOVE, LD CIT DR DREW OUR ATTENTION TOWARDS FINDINGS RECORDED BY THE LD CIT(A) AND SUBMITTED THAT THE APPELLANT HAS NOT EXPLAINED THE HUG E AMOUNT OF CASH TAKEN BY SHRI UMA CHARAN PANDA AND NO SUCH DEPOSITION WAS FILED EITHER DURING THE COURSE OF SEARCH OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IF HE COULD CARRY THE HUGE AMOUNT OF CASH FOR MAKING PURCHASES FROM KA W ADI WALAS LOCATED AT THE DIFFERENT PLACES, THEN HE COULD EASILY BRING BACK THE UNUTILISED CASH, WHICH WILL BE MUCH SMALLER THAN THE CASH CARRIED BY HIM FOR PURCHASES FROM KABADIWALAS. LD CIT DR ALSO SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN ANY DETAILED PURCHASES, WHERE THE Y WERE ACCOUNTED AND TRANSPORTATION DETAILS CARRIED BY HIM FROM THESE PLACES TO THE ASSESSEES PLANT. THEREFORE, THE EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED AND ENTIRE ADDITION MAY KINDLY BE CONFIRMED. 8. ON CAREFUL CONSIDERATION OF THE RIVAL SU BMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT UNDISPUTEDLY AND ADMITTEDLY, THERE WAS CONTINUOUS CASH DEPOSITS AND CASH WITHDRAWALS FROM THE BANK ACCOUNT MAINTAINED WITH ICICI BANK IN THE NAME OF SHRI UMA CHARANA PANDA AND DURING SEARCH AND SEIZURE OPERATIO N, THE ASSESSEE IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 5 | 8 HAS OWN THIS BANK ACCOUNT BELONGING TO HIM. IT IS NOT IN DISPUTE THAT DURING THE PERIOD FROM SEPTEMBER, 2014 TO J ANU A RY, 2015 , NUMBER OF TRANSACTIONS INCLUDING CASH WITHDRAWALS AND DEPOSITS HAVE BEEN MADE THEREIN AND TOTAL AMOUNT OF DEPOSI T IS RS.1,79,06,477/ - . WE ALSO NOTE THAT LD CIT DR CANDIDLY ACCEPTED THAT THE PEAK CREDIT IN THE SAID BANK ACCOUNT WAS RS.13,06,500/ - AS ON 26.11.2014. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED BY LD AR RELIED VIZ; JUDGMENT OF HONBLE DELHI HIGH COU RT IN THE CASE OF D.G.GUPTA (SUPRA), JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI (SUPRA). FURTHER, IN THE CASE OF PURUSHOTTAM JHAWAR (SUPRA), THE HONBLE A.P. HIGH COURT HAS HELD THAT THE QUANTIFICATION OF UNDISCLOSED IN COME IS POSSIBLE BY APPLYING THE THEORY OF PEAK CREDIT WHERE THERE ARE REGULAR CASH DEPOSITS AND CASH WITHDRAWALS BY THE ASSESSEE FROM THE SAME BANK ACCOUNT. SO FAR AS THE CONTENTION OF THE ASSESSEE THAT BANK STATEMENT IS DUMP DOCUMENT IS CONCERNED, WE D ECLINE TO ACCEPT THAT THE EXPLANATION SUBMITTED BY THE ASSESSEE IS REGARDING PURCHASE OF SCRAP FROM THE KAWADI WALAS LOCATED AT DIFFERENT PLACES OF THE STATE. THEN, IT IS SAFELY PRESUMED THAT THE ASSESSEE HAS OWNED SAID BANK ACCOUNT MAINTAINED WITH ICICI IN THE NAME OF UMA CHARAN PANDA. THEREFORE, SEIZED DOCUMENT I.E. BANK STATEMENT CANNOT BE TREATED AS DUMB DOCUMENTS. 8. SO FAR AS THE CONTENTION OF LD CI T(A) NOTHING IN THE IMPUGNED ORDER IS CONCERNED, THE REVENUE AUTHORITIES CANNOT STEP INTO THE SHOES OF THE ASSESSEE FOR DESCRIBING ANY METHOD OF BUSINESS OR FINANCIAL OPERATION AND IT IS PREROGATIVE OF THE ASSESSEE HOW TO CONDUCT HIS BUSINESS AND FINANCIAL ACTIVITIES, THEREFORE, THE QUESTION OF DEPOSIT AND WITHDRAW THE MONEY IS NOT RELEVANT FOR DECIDING THE CONTROVERSY BEFORE US. IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 6 | 8 9. SO FAR AS ALLEGATION OF LD CIT DR THAT THE DETAILS OF ALLEGED PURCHASE S HAVE NOT BEEN GIVEN, WHERE THE Y WERE ACCOUNTED AND TRANSPORTATION DETAILS OF SUCH SCRAP CA RRIED BY HIM ARE CONCERNED, WE ARE OF THE VIEW THAT IF THE PURCHASES MADE BY SHRI UMA CHARAN PANDA AND TRANSACTION RECORDED IN THE BANK ACCOUNT DID NOT REFLECT IN THE BANK ACCOUNT, THEN THERE WOULD BE NO CONTROVERSY REGARDING DEPOSIT TO THE SAME BANK ACCOU NT. THEREFORE, THE LIMITED CONTROVERSY FOR OUR ADJUDICATION IS THAT WHETHER THE ENTIRE CASH DEPOSIT MADE BY THE ASSESSEE TO THE BANK ACCOUNT OF ICICI BANK MAINTAINED BY U.C. PANDA IS DISCLOSED INCOME OR UNDISCLOSED PROFIT OF THE ASSESSEE. IN ABSENCE OF A NY OTHER CORROBORATIVE EVIDENCE OR DOCUMENTS, WE ARE UNABLE TO AGREE WITH THE CONTENTION OF AUTHORITIES BELOW THAT THE ENTIRE AMOUNT OF CASH DEPOSIT IS UNACCOUNTED INCOME OR UNACCOUNTED PROFIT OF THE ASSESSEE BECAUSE WHEN THERE ARE REGULAR DEPOSITS AND WIT HDRAWALS FROM THE SAME BANK ACCOUNT, THEN THE AMOUNT PAYABLE BY THE ASSESSEE CANNOT BE TREATED AS INCOME OF THE ASSESSEE LEAVING ASIDE THE FACTUM OF CASH WITHDRAWALS FROM THE SAME BANK ACCOUNT. THE LD CIT DR HAS PLACED VEHEMENTLY THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS D.K.GARG DATED 4.8.2017 IN ITA 115/2005 TO SUPPORT THE FINDINGS ARRIVED AT BY THE AUTHORITIES BELOW. HOWEVER, ON CAREFUL AND VIGILANT READING OF THIS JUDGMENT, WE ARE IN AGREEMENT WITH LD A.R. THAT THE FACTS AND CIRC UMSTANCES OF THIS CASE ARE DISTINGUISHABLE ON FACTS FROM THE FACTS OF THE PRESENT CASE AS IN THAT CASE, THEIR LORDSHIPS IN PARA 11 CATEGORICALLY HELD THAT WHERE A SOURCE OF DEPOSIT IS NOT EXPLAINED AND THE CORRESPONDING OUTGO IS ALSO UNEXPLAINED, THE QUEST ION OF GIVING THE ASSESSEE THE BENEFIT OF PEAK CREDIT WOULD NOT ARISE. FURTHER, THEIR LORDSHIPS IN PARA 19 FINALLY HELD AS UNDER: IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 7 | 8 19. THE LEGAL POSITION IN RESPECT OF AN ACCOMMODATION ENTRY PROVIDER SEEKING THE BENEFIT OF 'PEAK CREDIT' APPEARS TO HAVE BEEN TOTALLY OVERLOOKED BY THE ITAT IN THE PRESENT CASE. INDEED, IF THE ASSESSEE AS A SELF - CONFESSED ACCOMMODATION ENTRY PROVIDER WANTED TO AVAIL THE BENEFIT OF THE 'PEAK CREDIT', HE HAD TO MAKE A CLEAN BREAST OF ALL THE FACTS WITHIN HIS KNOWLEDGE CON CERNING THE CREDIT ENTRIES IN THE ACCOUNTS. HE HAS TO EXPLAIN WITH SUFFICIENT DETAIL THE SOURCE OF ALL THE DEPOSITS IN HIS ACCOUNTS AS WELL AS THE CORRESPONDING DESTINATION OF ALL PAYMENTS FROM THE ACCOUNTS. THE ASSESSEE SHOULD BE ABLE TO SHOW THAT MONEY H AS BEEN TRANSFERRED THROUGH BANKING CHANNELS FROM THE BANK ACCOUNT OF CREDITORS TO THE BANK ACCOUNT OF THE ASSESSEE, THE IDENTITY OF THE CREDITORS AND THAT THE MONEY PAID FROM THE ACCOUNTS OF THE ASSESSEE HAS RETURNED TO THE BANK ACCOUNTS OF THE CREDITORS. THE ASSESSEE HAS TO DISCHARGE THE PRIMARY ONUS OF DISCLOSURE IN THIS REGARD. 10. IN VIEW OF ABOVE, WE HAVE NO HESITATION TO HOLD THAT THE PRESENT CASE IS NOT PERTAINING TO AN ASSESSEE DOING BUSINESS ACCOMMODATION ENTRY PROFIT THAT CASH DEPOSITS AND WITH DRAWALS HAVE BEEN MADE BY THE ASSESSEE BUT BY THE EMPLOYEE SHRI U.C.PANDA HIMSELF ON BEHALF OF THE ASSESSEE AND SUCH BANK ACCOUNT HAS BEEN OWNED BY THE ASSESSEE WITHOUT ANY DISPUTE. THEREFORE, THE FACTS AND CIRCUMSTANCES ARE CLEARLY DISTINGUISHABLE AND WE RESPECTFULLY HOLD THAT THE BENEFIT OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF D..K.GARG (SUPRA) IS NOT AVAILABLE FOR THE REVENUE IN THE PRESENT CASE. 11. IN VIEW OF FOREGOING DISCUSSION, WE REACH TO A LOGICAL CONCLUSION THAT THE AO WAS NOT CORRECT IN HOLDING THAT THE ENTIRE AMOUNT OF CASH DEPOSITS IS UNDISCLOSED INCOME OR UNDISCLOSED PROFIT OF THE ASSESSEE AND THUS, THE LD CIT(A) WAS NOT CORRECT IN CONFIRMING THE ENTIRE ADDITION MADE BY THE AO. 12. AT THE SAME TIME, WE HOLD THAT WHEN ADMITT EDLY AND UNDISPUTEDLY, THE ACCOUNT WAS NOT DISCLOSED TO THE DEPARTMENT THEN, THE AMOUNT OF CASH DEPOSIT CANNOT BE IGNORED BY THE REVENUE AUTHORITIES. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE MAY POINT OUT THAT THE ASSESSEE HAS ALREADY IT(SS)A NO.01/CTK/2019 ASSESSMENT YEAR : 201 5 - 201 6 P A G E 8 | 8 DI SCLOSED AMOUNT OF RS.15 CRORES DURING SEARCH AND SEIZURE OPERATION, WHEREIN, THE IMPUGNED BANK ACCOUNT WAS FOUND BY THE REVENUE AUTHORITIES. SINCE, WE ARE SATISFIED THAT THE AMOUNT OF CASH DEPOSIT AND CASH WITHDRAWALS HAVE BEEN MADE BY THE EMPLOYEE SHRI U .C.PANDA, ON BEHALF OF THE ASSESSEE AND THERE WERE REGULAR CASH WITHDRAWALS AND DEPOSITS HAVE BEEN MADE IN THE SAME BANK, THEREFORE, THE ENTIRE AMOUNT OF DEPOSITS CANNOT BE TREATED AS UNDISCLOSED INCOME OR UNDISCLOSED PROFIT OF THE ASSESSEE . IN THESE PECU LIAR FACTS OF THE CASE, THE ASSESSEE IS ENTITLED TO BENEFIT OF PEAK CREDIT THEORY OF RS.13,06,500/ - BEING CLOSING BALANCE AS ON 26.11.2014. THEREFORE, GROUND NO.3 OF THE ASSESSEE IS PARTLY ALLOWED AND ADDITION MADE BY THE AO IS RESTRICTED TO THE PEAK CRE DIT AMOUNT OF RS.13,06,500/ - . 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 8 / 0 6 /20 20 . SD/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 8 / 0 6 /20 20 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT . NEW LAXMI STEEL & POWER PVT LTD., FLAT NO.M/61, MADHUSUDAN NAGAR, UNIT - IV, BHUBANESWAR 2. THE RESPONDENT. ACIT - 1 , BHUBANESWAR. 3. THE CIT(A) - 2 , BHUBANESWAR 4. PR.CIT - 2 , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//