ACIT Central -1, Bhopal V. Shri Vijeet Kumar Bhatter, Pipariya

ITSSA 145/Ind/2021

AI Insights

The case involves two appeals by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the Assessment Years 2015-16 and 2016-17. The appeals were related to the deletions of additions made by the Assessing Officer on various grounds including unrecorded transactions, undisclosed investments in girvi business, and unexplained jewellery found during a search operation under section 132 of the Income Tax Act. The Tribunal examined the submissions, the seized material, and the cash flow statements provided by the assessee. It was found that the assessee had offered additional income in the returns filed and that the cash flow statements accounted for all transactions, including recoveries of loans. The Tribunal noted that the AO had not considered the inflows while making the additions and that the peak credit theory should be applied.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130660 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-07-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-05-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 21-11-2021
• Other Referred Cases: Pullangode Rubber Produce Co Ltd vs State of Kerala, Commissioner of Income Tax vs Ratanlal Vyaparilal Jain, Commissioner of Income Tax vs M.S Agrawal (HUF), Ashok Chaddha vs ITO, Smt Pati Devi vs Income Tax Officer, Dharamdas Agarwal vs ITO, Indus Holidays & Tours India Pvt Ltd vs ACIT, Shree Nitesh Kashliwal vs ITO, Santish Kumar vs ITO, Tirupati Construction Company vs ITO, Ishwardas Mutha vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Peak credit; Block assessment; Retraction; Documents seized; Bogus
• Section: 68; 69; 132; 271(1)(c); 250; 69A; 48; 73; 13; 22; 20

Judgement Text

Page 1 of 34 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No. 145 & 146/Ind/2021 (Assessment Year:2015-16 & 2016-17) ACIT (Central)-1 Bhopal Vs. Shri Vijeet Kumar Bhatter C/o Manish Traders, Cement Road, Kabra Colony, Pipariaya (Appellant / Revenue) (Respondent/ Assessee) PAN: ABJPB 4659 C Revenue by Shri P.K. Mishra, CIT-DR Respondent by Ms. Nisha Lahoti & Shri Vijay Bansal ARs Date of Hearing 09.05.2023 Date of Pronouncement 28.07.2023 O R D E R Per Vijay Pal Rao, JM: These two appeals by the Revenue are directed against the composite order dated 26.08.2021 of Commissioner of Income Tax(Appeal), for Assessment Years 2015-16 and 2016-17 respectively. For A.Y. 2015-16 the revenue has raised following grounds of appeal: “1. On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 1,01,96,385/- made by the Assessing Officer on account of unrecorded and unexplained transactions. 2. On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 6,66,125/- made by the Assessing Officer on account of undisclosed investment in girvi business. IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 2 of 34 Page 2 of 34 3. On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 52,24,541/- made by the Assessing Officer on account of unexplained jewellery found from the locker of Shri Vijeet Bhatter.” 2. Ground no.1 is regarding the addition of Rs.1,01,96,385/- made by the AO on account of unrecorded transactions of money lending which was deleted by the Ld. CIT(A). The assesse is an individual and proprietor of M/s Faith Agro Solutions and also partner of Narmada Valley Warehouse. The assesse is also having business of money lending. There was a search and seizure operation u/s 132 of the Act on 05.10.2015 at the residence and business premises of the assesse. During the course of search and seizure proceedings various documents reflecting transactions of cash loan on interest against the pledging of warehouse receipts were found and seized. The seized material also contains handwritten pages of diary having entries of cash receipts and payments made on day to day basis. The statement of assesse was recorded u/s 132(4) of the Act wherein the assessee was confronted with the seized material. The assesse admitted all the entries in the seized record being cash receipts and payments made by him. The assesse surrendered a sum of Rs.3.2 cr on account of undisclosed income for F.Y.2015-16 relevant to A.Y.2016-17. In the return of income filed in response to notice u/s 153A, the assesse offered the additional income on account of unaccounted/undisclosed income of Rs.50 lac for A.Y.2015-16 and Rs.85 lac for the A.Y. 2016-17. The AO made the addition of the balance undisclosed income being unexplained investment of Rs.1,986850/- and Rs.3,72,50,842/- for A.Y.2015-16 & 2016-17 respectively. On appeal the Ld. CIT(A) deleted the addition made by the AO on these accounts. 3. Before the Tribunal the Ld. DR has submitted that the Ld. CIT(A) has deleted the addition by accepting explanation of the assesse which is completely contrary to the admission of the assesse in the statement recorded u/s 132(4) in the context of the entire entries found in the seized material. Once undisclosed income is unearthed during the search and IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 3 of 34 Page 3 of 34 seizure action as recorded in the seized material which is an incriminating material then this claim of the assesse that only peak credit can be considered as unaccounted income is not justified. Further, the assesse cannot take a different stand on the entries in the seized material that some of the entries do not belong to the assesse. Further the Ld. CIT(A) has accepted the submission of the assesse that some of the entries in the seized material do not belong to the assesse but belong to M/s. Pragati Agro Warehousing partnership firm without verifying the fact that whether those entries are disclosed by the partnership firm or not. He has referred to the details of warehouse receipt at page 35 to 52, 85 to 88 of the paper book and submitted that the Ld. CIT(A) has accepted the details furnished by the assesse showing some of the transactions as in the name of Pragati Agro Warehouse Corporation. He has pointed out that there are ambiguity in the details of the account as some of the transaction of M/s Commodity Solution and some of the transactions of M/s Pragati Agro Warehouse are accepted by assessee. The Ld. CIT(A) has deleted the addition on the basis of cash flow statement without verifying entries therein whereas the AO has recorded the relevant facts in the assessment order and pointed out that the transactions are not recorded in the books of account and therefore, representing undisclosed income of the assesse u/s 69 of the Act. Thus, the Ld. DR has submitted that the statement of the assesse recorded u/s 132(4) coupled with the seized material constitute a tangible incriminating material to prove the undisclosed income of the assesse. 4. On the other hand, the Ld. AR has submitted that the AO has made addition merely on the basis of the warehouse receipts of Astha warehousing and logistics corporation, the Narmada Valley warehousing Corporation and Pragati Agro Warehousing Corporation; all these are family concerns of the assesse family in which the assessee is a partner or other family member of the assessee is partner. Ld. AR has explained that the farmers keep the food grains in the warehouse against which warehouse receipts are issued to them and one copy of the receipt is retained. The warehouse receipts contains name and address of the IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 4 of 34 Page 4 of 34 farmers, description of the food grain, number of bags kept by the farmers in the warehouse. In the warehouse receipt estimated value of the food grains is also mentioned. Ld. AR has further submitted that the assesse is doing business of financing against the warehouse receipts in the name of Commodity Solutions therefore, when a loan is given by the assesse in his personal capacity against the warehouse receipt, a separate receipt of loan given to farmer is issued by the assessee and the same is attached with the related warehouse receipts for future records. 5. Ld. AO has made the addition of entire warehouse receipts for A.Ys. 2014-15,2015-16 & 2016-17, however, the transactions belong to the assesse are only in the nature of loan given by the assessee against some of the warehouse receipts and separate receipt of loan given to the farmers is issued by the assesse. The ld. AR has explained that this is not a case of finance against each and every warehouse receipts but only the transactions where the receipt is issued by the M/s Commodity Solution the propriety concern of the assessee in the Finance business belong to the assesse and warehouse receipts do not belong to the assesse but those transactions are only record of the food grains kept by the farmers in the warehouse and do not disclose any income. Even those transactions are not related to the assessee but to the partnership concerns. Ld. AR has referred to the details of the seized material LPS-1 page 1 to 83, LPS-2, LPS-8 and submitted that the AO has made addition on the ground that various transactions are not recorded in the books of account whereas the question of not recording these transactions in the books of account of assesse does not arise when the transactions belong to the partnership firm and not the assesse. Further when the assesse is not maintaining regular books of account then the addition cannot be made on the ground that the transactions are not recorded in the books of account. Ld. AR has further submitted that the details of business of loan recorded in the LPS-1 are incoming as well as outgoing cash transactions and assesse has accepted all the transitions of loan as recorded in the seized material and offered the same to tax in the return of income. The IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 5 of 34 Page 5 of 34 Ld. AR has referred to the details as reproduced by the Ld. CIT(A) wherein the assesse has explained nature of transactions and the amounts mentioned in the receipt is the value of the food grain kept by the farmers in the warehouse. Wherever the assessee has given loan against warehouse receipts it is specifically mentioned and loan receipt is issued by the assesse M/s. Commodity Solution. Therefore, the addition made by the AO by taking entire warehouse receipt as loan transactions of the assesse is contrary to the fact recorded in the seized material itself. The Ld. AR has referred to the details of each and every documents seized during the search and submitted that only in certain case the loan was given by the assesse against warehouse receipt and separate receipt is issued attached with the warehouse receipt and in all other cases of warehouse receipt no loan was granted and therefore, those transactions do not belong to the assesse. She has relied upon the order of the Ld. CIT(A) and submitted that the cash flow statement contained all the transaction of cash receipt and loan given by the assesse even the deposits made in the bank as well as other expenses are shown in the cash flow statement and therefore, once the assesse has explained all the transactions of inflow and outflow of cash then the addition made by the AO is not justified and the Ld. CIT(A) has rightly deleted the same. 6. We have considered the rival submissions as well as relevant material on record. During the course of search and seizure proceedings inter alia a diary was seized and marked as LPS-1. The said seized material contained various entries which were not recorded in the books of account as the assesse is not maintaining regular books of account. The assessee in the statement recorded u/s 132(4) has admitted this fact of non-maintaining regular books of account and therefore, the entries recorded in the diary was the only recorded kept by the assessee for his memory. The assesse surrendered unaccounted income of Rs.90 lac on account of cash loan against warehouse receipt. The AO has recorded the details of the seized material in para 8.4 as under: IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 6 of 34 Page 6 of 34 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 7 of 34 Page 7 of 34 7. For A.Y.2015-16 the details are given from serial no.59 to 69. The assessee has offered Rs.51 lac in the return of income to cover all the discrepancies found during the course of search and seizure proceedings. IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 8 of 34 Page 8 of 34 The AO held that the transactions of cash loan recorded in the seized material is unaccounted income of the assesse as not found recorded in the books of account and consequently an addition of Rs. 1,01,96,385/- was made for A.Y.2015-16. The assesse offered the said income of Rs.51 lac on the basis of peak credit and also claimed that some of the transactions do not belong to the assessee but to M/s. Pragati Agro Warehouse Corporation a partnership firm. The AO did not accept this explanation of the assessee and made addition of the entire amount as income of the assesse without considering the availability of the fund on account of receipt of the recovery of the loan. Though the Ld. DR has submitted that the assesse surrendered the income in the statement recorded u/s 132(4) of the Act and the subsequent stand of the assesse is after thought however, we find that when the seized material itself shows both inflow and outflow of money daily basis then the inflow of cash recorded in the seized material cannot be ignored while considering the source of cash loan. The Ld. CIT(A) has considered this issue as under: “Assessment Year 2015-16 (Rs. 1,01,96,385/- ) The appellant has stated that the entire loan of Rs. 53,45,000/- has been fully shown in cash flow statement. Further, the sum of Rs. 20,00,000/- mentioned on page no 38 of LPS-2 is statement of interest calculation and appellant has earned interest of Rs. 8,67,850/- in AY 2015-16 and the same has been shown while filing return of income. Further, the entries of Rs. 2,10,000/- does not pertain to the year under consideration. Lastly the appellant has contended that no amount as mentioned on page no 10, 26, 28, 102 of LPS- and page no 66-68 of LPS-5 was funded. The appellant has further stated that all the genuine transactions are fully covered in cash flow statement which has been accepted by the AO. In support appellant has filed copy of cash flow statement and has provided explanation for entries mentioned on loose papers. The relevant extract of cash flow statement and explanation offered by appellant is as under:- Particulars Amount Opening balance as on 01.04.2014 Add: Cash inflow Agricultural receipts Cash withdrawal from Narmada Vally Cash withdrawal from Krishna Warehouse Cash received from WHR loan Cash received interest Cash withdrawal & retained in 331576 1272392 200000 800000 2720000 979700 799804 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 9 of 34 Page 9 of 34 Commodity Solution Cash from CMPG Bank (For WHR loan in Commodity Solution) Cash from WHR loan in Commodity Solution (given through CMPGB) Cash surrendered Total 2667000 10979175 5100000 25849647 Less: Cash Outflow Agricultural expenses Cash deposited in HDFC Bank Cash deposited in SBI Bank Cash deposited in DCB Bank Cash paid WHR Loan A/c Cash paid to finance & Udrat Cash paid to Girvi A/c Income Tax Cash expenses of Commodity Solutions WHR Loan in commodity Solution (Through CMPGB) Cash deposit in CMPG Bank (for WHR loan in commodity Solution) Personal withdrawals Total 548217 65000 25000 66000 8265710 2158285 670000 10510 374555 2667000 10802400 41000 25693677 Cash balance as on 31.03.2015 155970 The explanation offered by the appellant is also reproduced for ready reference:- S.No. of A.O’s order LPS Name Amount Explanation 24 LPS-2/33 Anand Maheshwari 886 Handling bill of Anand Maheshwari of Pragati Agro Ware Housing Corporation. Not related to assessee. 25 LPS-2/10 Chandra Shekhar 3,67,300 This is a ware house receipt of Pragati Agro Ware Housing Corpn related to farmer Chandra Shekhar. Rs. 3,67,300 as mentioned in this receipt is the value of grain kept by farmer in the said ware house. It is submitted that Pragati Agro Ware Housing Coprn is a partnership firm and this seized receipt is the office copy of the ware house receipt of the farmer. The paper does not relate to assessee and there was no funding by the assessee against the said paper. IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 10 of 34 Page 10 of 34 26. LPS-2/26 Anand Maheshwari 8,04,375 This is a ware house receipt of Pragati Agro Ware Housing Corpn related to farmer Anand Maheshwari. Rs. 8,04,375 as mentioned in this receipt is the value of grain kept by farmer in the said ware house. It is submitted that Pragati Agro Ware Housing Coprn is a partnership firm and this seized receipt is the office copy of the ware house receipt of the farmer. The paper does not relate to assessee and there was no funding by the assessee against the said paper. 27 LPS-2/28 Ram Prasad Kaurav 6,88,950 This is a ware house receipt of Pragati Agro Ware Housing Corpn related to farmer Ram Prasad Kaurav Rs. 6,88,950 as mentioned in this receipt is the value of grain kept by farmer in the said ware house. It is submitted that Pragati Agro Ware Housing Coprn is a partnership firm and this seized receipt is the office copy of the ware house receipt of the farmer. The paper does not relate to assessee and there was no funding by the assessee against the said paper. 28 LPS-2/72 Pushpendra Singh 35,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 29 LPS-2/81 Deepak Rai 75,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 30 LPS-2/92 Hemant Rai 8,50,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 31. LPS- 2/102 Laxmi Narayan 1,74,209 This is a ware house receipt of Pragati Agro Ware Housing Corpn related to farmer Laxmi Narayan Rs. 1,74,209 as mentioned in this receipt is the value of grain kept by farmer in the said ware house. It is submitted that Pragati Agro Ware IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 11 of 34 Page 11 of 34 Housing Coprn is a partnership firm and this seized receipt is the office copy of the ware house receipt of the farmer. The paper does not relate to assessee and there was no funding by the assessee against the said paper. 32. LPS- 2/108 Vaibhav Chandak 4,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 33 LPS-5/5 Sharad Raghuvanshi 85,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 34. LPS-5/14 Mahendra Singh 80,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 35 LPS-5/16 Prakash Rawat 1,75,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 36 LPS-5/27 Sunil Rai 1,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 37 LPS-5/36 Omprakash Raghuvanshi 2,60,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 38. LPS-5/42 Deepak Rai 40,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 39 LPS-5/70 Shivani 1,25,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 39 LPS-5/72 Shri Roop Narayan 1,50,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 40 LPS-5/74 Arjun Singh 70,000 This is WHR loans and included IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 12 of 34 Page 12 of 34 in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 41 LPS-5/76 Shri Ram Prakash 3,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 42 LPS-5/78 Niraj Agarwal 1,30,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 43. LPS-5/80 Sita Devi 1,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 44. LPS-5/82 Niraj Agarwal 1,80,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 45 LPS-5/84 Niraj Agarwal 1,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 46 LPS-5/94 Ramesh Chandra 2,85,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 47 LPS-5/66 Pannalal 6,05,665 This is a ware house receipt of Pragati Agro Ware Housing Corpn related to farmer Pannalal Rs. 6,05,665/- as mentioned in this receipt is the value of grain kept by farmer in the said ware house. It is submitted that Pragati Agro Ware Housing Coprn is a partnership firm and this seized receipt is the office copy of the ware house receipt of the farmer. The paper does not relate to assessee and there was no funding by the assessee against the said paper. 48 LPS- 5/104 Shiv Kumar 1,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 13 of 34 Page 13 of 34 statement 49. LPS- 5/106 Hari Singh 2,40,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 50 LPS-9/11 Ram Prakash 4,65,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 51 LPS- 11/21 Rajendra Tomar 4,20,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 52 LPS- 11/23 Gopal Rai 3,25,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 53 LPS- 11/28 Raghuvir Singh 40,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 54. LPS- 11/45 Bhimsen 1,10,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 55 LPS- 11/106 Gopal 2,00,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 56 LPS- 11/48 Bhimsen 1,15,000 This is WHR loans and included in the figure of Rs. 82,65,710 appearing on the out flow side of memorandum of cash flow statement 57 LPS-2/38 Statement of interest calculation 15,00,000 This is a interest calculation chart relate to finance activities. This chart shows income of interest Rs. 8,67,850 of the F.Y. 2015-16 which is shown in the tax return and the same forms the part of the total income Rs. 85 lacs surrendered in the return. Rs. 20 lacs (15 lacs + 5 lacs) were advanced in the F.Y. 2014-15, which is shown in the memorandum of cash rotation 58 LPS-2/38 Statement of interest calculation 5,00,000 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 14 of 34 Page 14 of 34 statement and the same forms the part of Rs. 21,58,285 The appellant has explained all the transactions with supportive cash flow statement. The AO has not pointed any defect in the cash flow statement submitted by the appellant, mere making a sweeping remark that it is afterthought has not merit. The findings of the AO should have pin pointed specific defect which could prove that cash flow statement prepared by the appellant is faulty and cannot be relied upon, which is completely missing in the instant case. The AO before making impunged addition ought to have considered the fact that entries of Rs. 2,10,000/- does not pertain to the year under consideration and the transaction mentioned on page no page no 10, 26, 28, 102 of LPS- and page no 66-68 of LPS-5 no loan was given only grains were stored in ware house. Thus, the AO was not justified in making addition without appreciating entire keys facts of the case and also not justified in making addition on assumption and presumption bases. • Assessment Year 2016-17 (Rs. 16,65,290/-) The appellant has stated that the entire loan of Rs. 13,36,000/- has been fully shown in cash flow statement. Further, the sum of Rs. 3,29,290/- mentioned on page no 2 of LPS-4 was given through DCB bank. The appellant has further stated that all the genuine transactions are fully covered in cash flow statement which has been accepted by the AO. In support appellant has filed copy of cash flow statement and has provided explanation for entries mentioned on loose papers. The relevant extract of cash flow statement and explanation offered by appellant is as under:- Particulars Amount Opening balance as on 01.04.2015 Add: Cash inflow Agricultural receipts Cash withdrawal from Narmada Vally Cash received from WHR loan Cash recovery from Finance & udrat Interest received from finance/Udrat/WHR Loan Cash withdrawal & retained in Commodity Solution Surrendered Income Total 155970 1097897 275000 1121000 3656285 1133780 151715 8500000 16091647 Less: Cash Outflow Agricultural expenses Cash deposited in HDFC Bank Cash deposited in DCB Bank Cash paid to Narmada velly Cash purchase plot Cash paid to WHR Loan Cash paid to finance & Udrat Cash paid to Girvi A/c Income Tax Cash expenses of Commodity 758188 320000 52000 50000 678300 7163300 2050000 1949350 300000 67271 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 15 of 34 Page 15 of 34 Solutions Personal withdrawals Cash seized with IT department Total 200865 950000 14539274 Cash balance as on 31.03.2016 1552373 8. The facts recorded by the Ld. CIT(A) has not been disputed by the AO except the contention that the assesse has not produced any evidence to prove that some of the transactions are not related to the assesse but are related to the partnership firm. It is a matter of record as part of the seized material itself that certain transactions are recorded in the name of the partnership firms and therefore, the seized material itself reveals this fact. The AO has made addition only on the basis of entire transactions recorded in the seized material and statement of the assesse recorded u/s 132(4) without verifying the fact whether all the transactions recorded in the seized material belong to the assesse or not. Accordingly when the Ld. CIT(A) has examined the entire record and details of the transactions recorded in the seized material and then given a finding of fact which is not countered by the AO with any material or fact on record then we do not find any error or illegality in the impugned order of Ld.CIT(A) qua this issue. 9. Ground no.2 is regarding the addition made by the AO on account of investment in girvi business of Rs.6,66,125/- which was deleted by the Ld. CIT(A). 10. Ld. DR has submitted that the assesse in the statement recorded u/s 132(4) has surrendered the income on account of undisclosed income from Pawning business being carried on by the grandmother till her death and thereafter by the assesse. He has thus submitted that the assesse himself owned the business and therefore, the income of the said business is assessable in the hand of assesse. He has relied upon the order of the AO. 11. On the other hand, ld. AR has submitted that the assesse explained this fact that the pawning business was being carried on by his IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 16 of 34 Page 16 of 34 grandmother and after her death it is owned by his father. The assesse was only assisting the ailing grandmother and therefore, the income of the said business is not assessable/taxable in the hand of the assesse. The Ld. AR supported the impugned order of the Ld. CIT(A) on this issue. 12. We have considered rival submission as well as relevant material on record. In reply to question 24 in the statement recorded u/s 132(4) the assesse has explained as under: न 24: आपके घर 1/1 काबरा कॉलोनी, #पप$रया (होशंगाबाद) म+ ज-ती एवं तलाशी काय1वाह के दौरान आपके #पताजी 2ी #वजर भ4टर जी के Bedroom से सोने एवं चांद क8 पोट9लयां 9मल है जो आपने #व9भ न ;कसानद को उधार अथवा Aयाज पर >दए गए धन/लोन के बदले म+ गरवी रखी #व9भ न ;कसान< क8 अमानते है जो आपका Aयाज पर >दया धन ा-त होने पर ;कसान< को वा#पस लौटानी है । क ृ पया #वEतार से बताए ;क उFत गरवी सोने चांद के बदले म+ ;कतना धन (Amount)आपने उधार अथवा Aयाज पर >दया गया एवं उFत धनरा9श के EGोत क8 लेखा प ु Eतक+ भी Eत ु त कर+ । उIर : जी हाँ, उपरोFत सोने-चांद क8 पोट9लयां 9मल है जो हमार दाद (grand mother)Aयाज पर द गई धनरा9श के एवज म+ security के Mप म+ रखने के 9लए 9लया करती थी िजनका #पछले 10 मह ने पहले Eवग1वास हो गया एवं उसके एवज म+ >दया गया धन का मा9लकाना हक मेरे #पता अथा1त हमारे प$रवार के पास है एवं मQ घर का महRवप ू ण1 सदEय होने के नाते उस संदभ1 म+ जवाब दे सकता ह ू ँ अथवा इस धनरा9श पर ;कसी भी कार का Tनण1य लेने के 9लए EवतंG ह ू ँ । तथा मQ यह भी कहना चाहता ह ू ँ ;क #वगत वषV से दाद क8 तबीयत नासाज (खराब) होने के कारण उFत काय1 मQ ख ु द देख रहा ह ू ँ एवं यह सब मेर आय का >हEसा है । मेर दाद के नाम से के वल लोने देने का लाइस+स था िजसे मQ ख ु द operate करता था । उFत पोट9लय< /ह ु Wडी म+ से #वIीय वष1 2013-14 म+ Z. 2,97,450/- (दो लाख सIानवे हजार चार सौ पचास Zपये), #वIीय वष1 2014-15 म+ Z. 6,66,125/- (छ लाख `यासठ हजार एक सौ पaचीस Zपये) एवं 2015-16 म+ Z. 19,86,850/- (उ नीस लाख Tछयासी हजार आठ सौ पचास Mपये) #व9भ न लोगदए गए । जो मेर Tनय9मत लेखा प ु Eतक< म+ दज1 या के अTत$रFत आय है िजसे मQ उपरोFत IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 17 of 34 Page 17 of 34 #वIीय वषV अथा1त 2013-14, 2014-15 एवं 2015-16 म+ cमशः Z. 2,97,450/-, Z. 6,66,125/- एवं Z. 19,86,850/- िजनका क ु ल योग Z. 29,50,425/- (उनतीस लाख पचास हजार चार सौ पaचीस Mपये) है जो ;क मेर उपरोFत #वIीय वषV अघो#षत आय (income) Eवीकार करता ह ू ँ एवं आयकर अ धTनयम 1961 क8 लाग ू होने वाल #व9भ न धाराओं के तहत Tनधा1$रत आयकर का भ ु गतान कराना Eवीकार करता ह ू ँ । 13. As it is clear from the above statement that the assessee has explained this fact related to the Pawning business carried out by his grandmother. It is manifest from the statement that articles of jewellery along with details of the person found during the search are related to the pawning business of his grandmother already expired about 10 months before the search. The AO has not disputed the fact that those articles of jewellery are kept as security against the loan given to the person by the grandmother of the assessee. The assesse also explained that the business was inherited by his father after the death of his grandmother. Therefore, the income of the said business cannot be assessed in the hand of the assesse. The Ld. CIT(A) has considered this issue in para 4.1.2 as under: “4.1.2 The AO has also made addition of Rs.2,97,450/- in AY 2014-15, Rs. 6,66,125/- in AY 2015-16 and Rs. 19,86,850/- in AY 2016-17 on account of loan given in pawning business. During the course of search, the appellant gold and silver articles were found alongwith slips. The gold and silver were pledged against loan to various persons. Statement of appellant was recorded on oath during the course of search and appellant stated that the loan were given by his grandmother and being old age he maintains all his accounts of pawning business and to avoid mental stress made voluntary surrender of Rs.2,97,450/- in AY 2014-15, Rs. 6,66,125/- in AY 2015-16 and Rs. 19,86,850/- in AY 2016-17. The appellant however, has retracted from his statement. The appellant before me has taken a plea that while preparing cash flow statement for AYs 2014-15 to 2016-17 the appellant came to know that he has invested his amount in pawning business to the tune of Rs. 3,68,000/- in AY 2014-15, Rs. 6,70,000/- in AY 2015-16 and Rs. 19,49,350/- in AY 2016-17. Thus, the appellant, in AY 2016-17, has failed to explain source of sum of Rs. 37,500/- (Rs. 19,86,850/- - Rs. 19,49,350/-). The appellant has explained the reason for retraction to the AO, the AO however, did not consider the same and rejected plea of the appellant stating that the cash flow statement submitted by the appellant is an afterthought. IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 18 of 34 Page 18 of 34 Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co Ltd vs State of Kerala 91 ITR 18 (SC) has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. In the instant case, the appellant has explained all the transactions with supporting cash flow statements. The AO has not pointed out any defect in the cash flow statement submitted by the appellant, mere making a sweeping remark that it is afterthought has no merit. The findings of the AO should have pin pointed specific defect which could prove that cash flow statement prepared by the appellant is faulty and cannot be relied upon, which is completely missing in the instant case. Thus, the AO was not justified in making addition without appreciating entire key facts of the case and also not justified in making addition on assumption and presumption basis.” 14. Thus, the AO has made the addition by taking the selected part of the statement recorded u/s 132(4) without considering the fact that the assesse has explained in the statement that the business of pawning belong to the grandmother up to her death and then father of the assesse. Therefore, in the facts and circumstances of the case as discussed above we do not find any error or illegality in the order of the Ld. CIT(A) qua this issue. 15. Ground no.3 is regarding the addition of Rs.52,24,451/- made by the AO on account of unexplained jewellery found from the locker which was deleted by the Ld. CIT(A). 16. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. The AO made an addition for the entire jewellery found in the locker without giving benefit of CBDT circular no.1916 dated 11.05.1994 as well as without considering reply of the assessee in para 10.7 to 10.12 as under: “10.7 In the return of filed, Shri Vijeet Bhattar has not offered the undisclosed income on account of unexplained jewellery found during the course of search declared in statement u/s 132(4) to tax in return of income. 10.8 The AR in his reply dated 07.12.2017 submitted that the sources of acquisition of jewellery is explained as follows: IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 19 of 34 Page 19 of 34 S.No. Source of acquisition Weight 1 Received under registered will of grand mother Smt. Ramklali Bai 560 gms. 2 Gold received on redemption of RBI bonds 500 gms 3 Received by Varsha in family partition 930 gms 4 Gold jewellery declared in VDIS-97 460. gms 5 Declaration of jewellery in the Wealth Tax 900 gms. 900 gms. Total 3350.4 gms The AR in his reply submitted that jewllery found in the lockers is fully explained and do not represent in any manner the undisclosed income of any member of the family. 10.9 The reply of the AR has been considered but not found acceptable because of the following reasons: • The gold as received by various assessee's in above mentioned table cannot be ascertained to be the same gold found in the locker. •No wealth tax return was filed by the assessee's in the intervening period, which could establish that the assessee's were in possession of such jewellery which was kept in the locker during the course of search. • No gold bars were found from the locker. 10.10 The Gold found from the locker of Shri Vijeet Bhatter was value at Rs. 52,24,541/- 10.11 In view of the above discussion, the gold found from the locker of Shri Vijeet Bhatter is unexplained. Therefore, as per section 69A of IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 20 of 34 Page 20 of 34 the Income Tax Act, 1961, Rs. 52,24,541/- is added to total income of the assessee for AY 15-16 on account of undisclosed jewellery found from locker during the course of search. 10.12 I am satisfied that this is a fit case for initiation of penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income on account of undisclosed gold found during the course of search. Therefore, penalty proceedings u/s 271(1)(c) is being initiated separately for AY 15-16. 17. On appeal the Ld. CIT(A)has considered and decided this issue in para 4.2.2 to 4.2.6 as under: “4.2.2 I have considered the facts of the case, the written submissions of the learned AR and various decision cited and also perused the assessment order. The appellant stated that the total gold jewellery 953.60 grams and silver items 38.6 kg were found during the course of the search from bank locker. The appellant in order to explain acquisition of gold jewellery submitted the following details :- S.No Source of acquisition Weight 1 Received under registered will of grand other Smt Ramklali Bai 560 grams 2 Gold received on redemption of RBI bonds 500 grams 3 Received by Varsha in family partition 930 grams 4 Gold jewelley declared in VDIS-97 460.40 grams 5 Declaration of jewellery in Wealth Tax Return of Meena Bhattar on 02.11.1992 900 grams Total 3350.40 grams 4.2.3 During the course of search statement of Shri Vijeet Kumar Bhattar was recorded on oath wherein he was unable to explain source of acquisition of jewellery found from bank locker and therefore, made voluntary disclosure of undisclosed income amounting to Rs. 34,65,179/-. On the contrary appellant submitted that the source of acquisition of jewellery has been duly explained before the AO and the AO made addition only on the basis of statement recorded during the course of search and without considering facts of the case. Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co Ltd vs State of Kerala 91 ITR 18 (SC) has IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 21 of 34 Page 21 of 34 held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. In the instant case, addition has been made on account of statement of appellant, however, the appellant on the other hand has explained step by step source of acquisition of jewellery. The family of the appellant initially received 48 tolas (560 grams) through will of Late Smt Ramklali Bai, Smt Varsha received 930.00 grams of gold jewellery and silver 31 kg at the time of partition of family on 12.10.1984. Thereafter, family of the appellant received 2063 grams of gold on redemption of RBI bonds, out of which 1563 grams of gold was deposited in SBI Gold Deposit Scheme and balance gold weighing 500 gms was available with the appellant which was used in making jewellery. Further, Smt Meena Devi w/o Vijay Kumar Bhattar made declaration in VDIS-97 and has also filed wealth Tax Return declaring 900 grms of jewellery. The AO has overlooked these vital facts and made addition on flimsy grounds such as no gold bars were found and no wealth tax return has been filed. It is seen that appellant has explained that 500 grms of gold received through redemption of RBI Bonds was used in making jewellery and wealth Tax Return has also been filed by Smt Meena Bhattar on 02.11.1992. Thus, the AO erred in totally in neglecting key and important facts of the instant case. 4.2.4 Nevertheless, appellant is living in a joint family and the jewellery found during the course of search belongs to different family members. The family of appellant consists of following members:- Name of family members Weight in grams Vedica d/o Vijit Bhattar 250 Rasika d/o Vijit Bhattar 250 Sainyam s/o Vijit Bhattar 100 Vijay Bhattar 100 Vijit Bhattar 100 Manish Bhattar 100 Aryan s/o Manish Bhattar 100 Richa Bhattar (Deceased wife of Manish Bhattar) 500 Shweta Bhattar w/o Vijit Bhattar 500 Total 2000 Reliance is placed on instruction no. 1916 of CBDT: “Instruction No. 1916 (F.No. 286/63/93-IT(INV.II), dated 11-5-1994, issued by the Central Board of Direct Taxes (‘CBDT’) directs the income tax authorities, conducting a search, to not seize jewellery and ornaments found during the course of search of varying quantities specified in the IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 22 of 34 Page 22 of 34 instructions, depending upon the marital status and the gender of a person searched. The guidelines are issued to address the instances of seizure of jewellery of small quantity in the course of search operations u/s. 132 that have been noticed by the CBDT. A common approach is suggested in situations where search parties come across items of jewellery for strict compliance by the authorities. The CBDT directed that in the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized.” Besides, this the jewellery found in bank locker belongs to entire family and not alone of appellant. The locker was also in joint name of appellant and Shri Manish Kumar Bhattar. 4.2.5 The law with respect to quantity of jewellery and ornaments which would generally be held by the family members of an assessee has gone through huge litigations. Boards’ instruction no 1916 dated 11 th may 1994 which lays down guidelines for seizure of jewellery and ornaments has also been interpreted by various courts and tribunals. • In the case Commissioner of Income Tax vs Ratanlal Vyaparilal Jain [(2010) 235 CTR 0568: (2010) 45 DTR 0290; ( 2011) 339 ITR 0351] it has been that: “Instruction no. 1916, dt 11 th may 1994 which lays down guidelines for seizure of jewellery in the course of search takes into account the quanity of jwellery which would generally be held by the family members of an assesse and, therefore unless anything contrary is shown, it can be safely presumed that the source to the extent of the jewelleryststed in the circular stands explained”. • In the case Commissioner of Income Tax vs M.S Agrawal (HUF) [(2008) 76 CCH 0802 MPHC: (2008) 11 DTR 0169 (MP)] it has been held that: “In the absence of any material found during search having nexus with undisclosed income, no addition could be made in block assessment under chapter XIV-B; further Tribunal was justified in deleting addition on account of jewellery having regard to CBDT Instruction No. 1916 dt. 11 may 1994.” • In the case Ashok Chaddhavs ITO (2011) 202 Taxman 395 it has been held that: “Section 69A of the Income-tax Act, 1961 - Unexplained moneys - Assessment year 2006-07 - During a search at assessee's residential premises, 906.900 gmsjewellery was found from assessee - Assessee explained that he was married 25 years back and jewellery was received by his wife in form of 'streedhan' or on other occasions such as birth of a child, etc. - Assessing Officer accepted only 400 gms of jewellery as IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 23 of 34 Page 23 of 34 explained and treated 506.900 gms of jewellery as unexplained and, accordingly, made addition under section 69A - Whether collecting jewellery of 906.900 gms by a woman in a married life of 25 years in form of streedhan or on other occasions is abnormal - Held, no - Whether therefore, Assessing Officer was unjustified in treating only 400 gms as 'reasonable' and treating remaining jewellery as 'unexplained' - Held, yes - Whether, therefore, addition made was to be deleted - Held, yes [In favour of assessee]”. • In the case SmtPati Devi vs Income Tax Officer and others Reported in 240 ITR -727 (Karnataka High Court) it has been held that: “by referring to instruction no 1916 it was held that it is not the value which is considered but it is the weight which is considered reasonable looking to the social circumstances prevailing in the country.” 4.2.6 Considering the aforesaid facts and circumstances of the case and the various decisions cited above the findings on this issue are as below: i). The family of the appellant has acquired jewellery in the year 1984, however, additions has been made on account of value of gold and silver as on date of search ii). Smt Meena Bhattar has filed Wealth Tax Return for AY 1992-93 on 02.11.1992 declaring total value of gold at Rs. 5,74,000/- for gold ornaments of 900 grms. iii). Jewellery weighing 500 grms received on redemption of RBI bonds was utilized for making gold jewellery which was found from bank locker of the appellant. The AO before rejecting plea of the appellant ought to have rejected various evidences filed by the appellant which he failed to do so. Thus, in view of the decisions cited above, the gold and silver jewellery from bank locker of the appellant amounting to Rs. 52,24,451/- (correctly Rs. 52,24,541/-) is held to be acquired way long back and not during AY 2015-16 as held by the AO. Therefore, addition made by the AO amounting to Rs. 52,24,451/- is Deleted. Therefore, appeal on this ground is Allowed.” 18. Thus, it is clear that the assesse produced all the evidence to explain the source of the jewellery which was not disputed by the AO before us except the contention that the assesse surrendered the income in the statement u/s 132(4). It is pertinent to note that once the assesse has produced undisputed evidence to explain the source of jewellery found in the locker then the addition made by the AO only on the basis of the statement is not justified and sustainable in law. Accordingly in the IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 24 of 34 Page 24 of 34 facts and circumstances of the case we do not find any error or illegality in the impugned order of the Ld. CIT(A) qua this issue. For A.Y.2016-17 19. The department has raised following grounds of appeal: “1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 2,85,49,351/- made by the Assessing Officer on account of undisclosed investments u/s 69 of the Income Tax Act. 2. On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 16,65,290/- made by the Assessing Officer on account of undisclosed amounts advanced as loans u/s 69 of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 19,49,350/- made by the Assessing Officer on account of undisclosed investments in girvi business.” 20. Ground no.1 is regarding the addition made by the AO on account of undisclosed transactions based on the seized material LPS-1 of Rs. 2,85,49,351/-. The assesse offered the income in the return of income on the basis of peak credit from the transactions recorded in the seized material being cash loans. The facts as well as seized material are common as it was for A.Y.2015-16. The Ld. DR has reiterated its contention as made for A.Y.2015-16. 21. On the other hand, Ld. AR has also repeated the submission as made for A.Y.2015-16. 22. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. As it is clear from the seized material itself that both inflow of cash as well as outflow of cash are reflected in the seized material. The AO has made the addition by considering only one side of the entries recorded in the seized material. Thus, considering only cash loan given by the assesse without taking into account the contra entry of recovery of cash loan during the year is arbitrary and unfair on IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 25 of 34 Page 25 of 34 the part of the AO. Further all the transactions of cash loan given and the amount receipts are recorded on daily basis, therefore, the source of cash loan to the extent of cash received recorded in the seized material ought to have been considered by the AO while making addition on this account. The Ld. CIT(A) has considered the issue as under: “4.3 Ground No. 1 & 2 for AY 2016-17:- Through this ground of appeal, the appellant has challenged the addition of Rs.2,85,49,351/- in AY 2016-17 on account of undisclosed investment not recorded in books of accounts. During the course of search page no 1 to 83 of LPS- 1(diary) was found and seized which contain details of money lending business carried out by the appellant. The relevant extract of the impunged diary has been reproduced by the AO on page no 4 to 6 of the assessment order. The appellant was confronted with the impunged diary and in reply to Q.No 21 he admitted unaccounted income of Rs. 3.20 crores in FY 2015-16 relevant AY 2016-17. The relevant extract of statement of appellant has been reproduced on page no 8 to 12 of the assessment order. The appellant while filing return of income has offered undisclosed income of Rs. 85,00,000/- only. Therefore, the AO required the assessee to explain the transaction. The assessee in reply submitted that the income has been offered on the basis of peak credit statement which comes at Rs. 34,50,649/-. The AO after considering reply of the assessee did not find the same acceptable and stated that each entry represents an independent transaction which has not been recorded in books of accounts and the peak credit theory is not applicable as the source of money is not same as the application of money shown in earlier dated entries and made addition to the income of the assessee. 4.3.1 I have considered the facts of the case, plea raised by the appellant and findings of the AO. The appellant before me as well as before AO has explained that the loose paper page no 1 to 75 of LPS-1 contain both cash incoming and cash outgoing entries with respect to short term loan given to farmers. The jotting were made for sake of memory. The appellant further submitted that a voluntary surrender of Rs. 3,20,00,000/- was made during the course of search, however, sum of Rs. 85,00,000/- was only offered to tax after applying peak credit theory. The AO on the other hand has rejected peak credit theory of the appellant by stating that each entry represents an independent transaction and the source of money is not same as the application of money. The appellant by taking alternate plea stated that the impunged diary mentions credit as well as debit entry of each day. The AO has IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 26 of 34 Page 26 of 34 taken cognigence of credit entries and has completely ignored the debit entries stating that the money received by assessee for making undisclosed investment is not the same money which has been invested, however, the AO has failed to bring on record any instance/document/ statement of the borrower or seller which could prove that the alleged money was not same. The presumption drawn by the AO is figment of his imagination laced with guess work and presumption. Since, there is not a single iota of evidence which could prove allegation of the AO correct, therefore, the only remedy to this issue is to apply peak credit theory. Hon’ble Jurisdictional ITAT Indore in the case of Indus Holidays & tours India Pvt Ltd and others vs ACIT in IT(SS)No 79 to 84/Ind/2017 & ITA No 269/Ind/2017 dated 28.03.2019 has clearly held that when there is difference in opinion about the source of cash deposited and withdrawn, better option is to apply peak credit theory by way of which the peak credit balance is taken as unexplained income and the same needed to be added in the income of the appellant. In the instant case, the AO has not accepted the plea of the appellant that the same money was rotated and investment were made from time to time. As far as voluntary surrender made by the appellant is concerned Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co Ltd vs State of Kerala 91 ITR 18 (SC) has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. In the instant case, the appellant has explained that the investment was made out of recovery of loans and funds available with the appellant and has also filed supporting cash flow statement showing all the transactions. Thus, in the light of Hon’ble Indore ITAT order, it is now abundantly clear that when there is difference of opinion the peak credit theory should be brought into action to ascertain true unaccounted income. On perusal of impunged diary, placed on record, the following was observed:- Date Inflow Day Total Outflow Day Total Net 01/04/2015 263000 OP Balance 01/04/2015 815000 300910 777090 02/04/2015 100000 646560 230530 03/04/2015 100000 88150 242380 06/04/2015 1485400 1126050 601730 07/04/2015 0 91800 509930 08/04/2015 626000 651812 484118 11/04/2015 675400 606200 553318 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 27 of 34 Page 27 of 34 10/04/2015 250000 260650 542668 13/04/2015 775250 803525 514393 14/04/2015 150000 162080 502313 15/04/2015 74500 55000 521813 16/04/2015 2259000 1760580 1020233 17/04/2015 0 172131 848102 19/04/2015 1097400 924485 1021017 21/04/2015 1900000 1104200 1816817 23/04/2015 532700 1255556 1093961 24/04/2015 101600 186850 1008711 28/04/2015 1217500 670000 1556211 29/04/2015 415000 163430 1807781 30/04/2015 1324000 1733250 1398531 01/05/2015 900000 881800 1416731 02/05/2015 785000 526500 1675231 04/05/2015 0 27000 1648231 06/05/2015 1450000 1442375 1655856 07/05/2015 400600 346324 1710132 08/05/2015 645000 650590 1704542 11/05/2015 760500 589110 1875932 13/05/2015 1617250 1049150 2444032 14/05/2015 355000 446497 2352535 15/05/2015 40000 473445 1919090 17/05/2015 1638710 832000 2725800 18/05/2015 1200000 981400 2944400 19/05/2015 19500 95000 2868900 21/05/2015 1914420 1628775 3154545 22/05/2015 107050 567305 2694290 23/05/2015 2275500 1888504 3081286 24/05/2015 291089 274000 3098375 25/05/2015 133700 415500 2816575 27/05/2015 1302125 825662 3293038 28/05/2015 1060000 1409686 2943352 29/05/2015 0 226570 2716782 01/06/2015 743950 682718 2778014 04/06/2015 683749 262100 3199663 05/06/2015 1633600 2268174 2565089 08/06/2015 346000 649500 2261589 12/06/2015 150000 140000 2271589 17/06/2015 436600 90040 2618149 18/06/2015 832500 0 3450649 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 28 of 34 Page 28 of 34 19/06/2015 30500 510950 2970199 22/06/2015 1766000 2000000 2291199 25/06/2015 336500 505479 2122220 26/06/2015 1433000 1444453 2110767 29/06/2015 84000 8500 2186267 30/06/2015 96450 1061000 1221717 01/07/2015 502400 794600 929517 02/07/2015 1250000 441950 1737567 03/07/2015 650000 607137 1780430 04/07/2015 609210 1114822 1274818 06/07/2015 824318 577871 1521265 07/07/2015 531562 461600 1591227 08/07/2015 511500 952100 1150627 09/07/2015 420000 60090 1510537 10/07/2015 1288100 1480895 1317742 12/07/2015 23000 16000 1324742 13/07/2015 994000 364300 1954442 14/07/2015 0 639900 1314542 15/07/2015 1138250 739000 1713792 16/07/2015 834970 2044840 503922 21/07/2015 31300 207900 327322 24/07/2015 539475 338800 527997 25/07/2015 175000 235000 467997 27/07/2015 249250 306950 410297 28/07/2015 924000 872100 462197 29/07/2015 1440000 957695 944502 30/07/2015 1971170 2223560 692112 31/07/2015 1245000 1341592 595520 01/08/2015 94130 98715 590935 03/08/2015 500000 592000 498935 04/08/2015 344700 334105 509530 05/08/2015 361100 17000 853630 06/08/2015 447350 521200 779780 07/08/2015 459000 798000 440780 09/08/2015 0 14500 426280 22/09/2015 28000 33000 421280 28/09/2015 698730 663878 456132 04/10/2015 337000 42610 750522 Thus, the peak credit comes at Rs. 34,50,649/- on 18.06.2015. The appellant has voluntarily offered sum of Rs. 34,50,649/- while filing IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 29 of 34 Page 29 of 34 return of income for AY 2016-17 which has also been accepted by the AO vide para 7.12 of the assessment order. 4.3.2 The appellant has also placed reliance on various decisions including decision of Hon’ble Jurisdiction ITAT in the case of Shree Nitesh Kashliwal vs ITO 24 ITJ 561 (Ind ITAT). The case laws relied by appellant are as under:- 1) Hon’ble ITAT Allahabad Bench in the case of ASSISTANT COMMISSIONER OF INCOME TAX vs. FERTILIZER TRADERS (2004) 83 TTJ 0473 (All) : (2004) 4 SOT 0607 (All) For ascertaining the peak credit, the correct principle is that each debit & credit should be arranged chronologically irrespective of the facts that such debit/credit appearing in the accounts and that from each receipt & payment, the balances should be struck. Such a balance then would go to cover all the earlier and subsequent receipt, payments, investment to the extent of peak and that is assessable as undisclosed income in the hands of the assessee. If the peak of debit balances is considered as income, the same will cover negative balance also occurring later on. Therefore, the higher of the two represented by net peak of the debit/credit is liable to be treated in principle the undisclosed income of the assessee. From the negative cash balances as appearing in the said summary of the balances, the only logical conclusion that emerges is that the payments exceed receipts (to the extent of negative cash balance) on various dates, the source of which remained unexplained. Therefore, such an excess payment over the receipts represents nothing but undisclosed income of the assessee liable to be assessed as such in the block assessment subject to the set off against the peak of debit/credit entries. 2. Hon’ble Indore ITAT in the case of Shree Nitesh Kashliwal Vs. ITO – 24 ITJ 561 (Ind):- We have heard the rival submissions and carefully considered the same. We noted that peak for the Assessment Year 2005-06 was Rs. 46,015/- while for the Assessment Year 2008-09, it was Rs. 5,524/-. Over all peak for all the years was as on 30 th December, 2003, at Rs. 95,317/- i.e. in the Assessment Year 2004-05. Therefore, the peak for the Assessment Year 2005-06 gets set-off against the peak relating to the Assessment Year 2004-05. At the most, the addition in the Assessment Year 2004-05 can be made in respect of the unexplained investment to the extent of Rs. 95,387/-. Once the peak for the Assessment Year 2004-05 is considered at Rs. 95,387/-, which is higher than the peak for the Assessment Year 2005-06 and 2008-09, we are of the view that no addition in respect of unexplained investment can be made in the Assessment Year 2005-06 and 2008-09. We, accordingly, set- aside the order of the Ld. CIT(A) on this issue and delete the addition IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 30 of 34 Page 30 of 34 sustained for both the years. Thus, the ground no. 3 for Assessment Year 2005-06 and ground no.2 for the Assessment Year 2008-09 are allowed. 3.) Santish Kumar Vs. ITO – 29 ITJ 255:- We have heard the rival submissions and perused the record of the case. We observe that the assessee being an agriculturist was having the benefit of Kisan credit card and was rotating the funds in his saving bank account. The rotation of funds is also supported by the affidavit and confirmation from farmers regarding the loans taken by them and repayment thereof. On account of this fund rotation, the assessee has yielded some profits, which has been shown by the assessee in his income tax return voluntarily. The peak amount of credit balance is at Rs. 4,00,259/- as on 11.06.2009 for Assessment Year 2010-11 and Rs.4,71,163.09 as on 09.07.2010 for Assessment Year 2011-12, which has been accepted by the AO in the remand after necessary verification. On perusal of paper book page 96 filed by the assessee, we observe that the peak credit balance in the saving bank account is covered from the Kisan credit cards aggregating to Rs. 5,32,000/- which was outstanding at the end of the financial year as per bank certificate as well as the agricultural income of the family members of the assessee. The explanation offered by the assessee was not disputed by the AO. The ITAT Indore Bench in case of Nitesh Kasliwal v. ITO, (2014) 24 ITJ 561 (Trib.-Indore) held that if the cash deposits in the saving bank account remained unexplained, only peak credit balance could be considered for addition. In the case at hand, since the AO in the remand report has accepted the entire credits as verifiable and submitted by Ld. AR that only an amount of Rs. 3,48,000/- for Assessment Year 2010-11 and Rs. 2,77,000/- should be treated as unexplained instead of Rs. 4,00,251/- and Rs. 4,71,163/- for respective assessment years. The assessee has demonstrated the inflow and outflow cash in the saving bank by filing the bank statement and also drawn our attention to the remand report filed by the AO, wherein, the peak credit and peak credit balance have been specified as the assessee is dealing with Kisan credit card as is reflected from the documents. Therefore, we are of the considered opinion that the amount of Rs. 51,26,480/- which has been taken by the AO as unexplained investment cannot be sustained in the eyes of law, therefore, same is deleted 4. Hon’ble Rajasthan High Court in the case of CIT Vs. Ishwardas Mutha – 270 ITR 597 (Raj) In this case, A.O. took only debit side and not taken peak credit. The Hon’ble High Court said that the addition could be made only to the extent of peak credit. 5. Hon’ble Rajasthan High Court in the case of Sind Medical Stores Vs. CIT - (2015) Tax Pub (DT) 1441 (Raj–HC) reported in 143(1) Tax Referencer Page 705 case no. 621 IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 31 of 34 Page 31 of 34 In this case, it is held that peak credit theory could be invoked and the entire addition could not be made. Assessee is entitled to the benefit of peak credit which ought to have been allowed, instead of making separate addition of entire amount. However, the A.O. had to come to a definite finding that the amount withdrawn was used by the assessee in any other expenditure or investment. If the A.O. came to finding that withdrawn amount was used or spent by the assessee for any other investment or expenditure then the benefit of peak of such credit, in such circumstances, might not be available. 6. Hon’ble MP High Court in the case of Dharamdas Agarwal [1983] 144 ITR 143 (MP) placed reliance on the decision of Hon’ble Supreme Court – “3. The law on the question which arises before us has been settled by the decision on the Supreme Court in Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 . It was observed in that case that there can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. It was further observed that it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year. The Supreme Court held that in each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case.” 7. Hon’ble Gujarat High Court at [2015] 55 taxmann.com 308 has upheld the decision of Hon’ble ITAT Ahmedabad Bench in the case of Tirupati Construction Company IT(SS) 73 to 75/Ahd/2010 order dated 13.11.2013. Relevant paragraphs are reproduced from the decision of Hon’ble ITAT – 29. The learned DR submitted that the grounds of the appeals of the Revenue are identical in all these three years as under: “i) The ld.CIT(A) has erred in law and facts and circumstances of the case in restricting For A.Y.2004-2005 addition of Rs.19,13,177/- on account of undisclosed income instead of addition made Rs.1,01,42,101/- For A.Y.2005-2006 addition of Rs.1,27,13,285/- to the extent of Rs.12,43,477/- on account of undisclosed income. IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 32 of 34 Page 32 of 34 For A.Y.2006-2007 addition of Rs.54,89,466/- to the extent of Rs.8,51,182/- on account of undisclosed income.” 30. Both parties before us submitted that the issue of addition on account of entries on seized papers/diary in these appeals of the Revenue is covered and connected with the issue in the assessee’s appeal for the assessment year 2004-2005. We have considered rival submissions. In view of our decision while disposing of the appeal of the assessee in appeal for A.Y.2004-2005 in IT(SS)A.No.179/Ahd/2009, we hold that the only peak of debit and credit entries of the seized papers/diary could be assessed as undisclosed income in the hands of the assessee, and there was no justification for adding the entire receipt side of the seized papers, and accordingly, there is no merit in the grounds of the appeal of the Revenue with regard to this issue, and are accordingly, dismissed. The decision in appeal for A.Y. 2004-05 in IT(SS) 179/Ahd/2009 is dealt in Para 14 and 15 of the same order which is also reproduced for ready reference – 14...................... The other issue is regarding the addition of Rs.19.42 lakhs as undisclosed income on account of seized diary. The learned counsel for the assessee submitted that the peak of credit and debit entries from the seized papers comes to Rs.14,35,666/- and the CIT(A) has further made addition of net profit at the rate of 5% of the gross receipts in the seized paper, and worked out the addition at Rs.19,42,771/-. He submitted that there is no justification for addition sustained by the learned CIT(A). The learned DR submitted that whole of the receipts was rightly taxed by the AO, and CIT(A) was not justified in restricting the same to Rs.19,42,771/-. 15. We have considered rival submissions and perused the orders of the AO and the CIT(A). We find that the peak amount of credit and debit entries on the seized papers amounting to Rs.14,35,666/- could be validity taxed in the hands of the assessee. In our view, there is no justification for further adding net profit at the rate of 5% on the gross receipts on the seized papers of the assessee. There is also no justification for the AO to add the entire receipts side of these seized paper, and not considering the peak of the credit and debit entries. In this view of the matter, we hold that the addition should be sustained to the extent of Rs.14,35,666/- as against Rs.19,42,771/- sustained by the learned CIT(A), and the ground of the appeal of the assessee is partly allowed to this extent. [emphasis supplied] Hon’ble Gujarat High Court [supra] dealt with the above decision in the same case in favor of the assessee and held in Para 7 as under – 7. At the outset, it is required to be noted that, while appreciating a document, it is required to be considered in its entirety and it cannot be considered in part. In the case on hand, while appreciating the papers / documents, which according to the Assessing Officer, contained accounted and unaccounted transactions on the part of the Respondent-assessee, she not only failed to examine it properly but also failed in assessing the income as per law. Further, though, the AO, herself, had prepared the IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 33 of 34 Page 33 of 34 account of profit and loss in respect of accounted and unaccounted entries, she did not assign any reason, as to why the profit and loss account of unaccounted transactions of the Respondent-assessee cannot be believed to be true. Moreover, the AO also did not take into consideration the explanations tendered by the Respondent-assessee vide letters dated 10.12.2008 and 29.12.2008. Even, the working of the peak based on the seized diary given by the Respondent-assessee for the concerned assessment years was also overlooked by the AO and, here again, no reason was assigned for the same. We are, therefore, of the opinion that the CIT(A) rightly held that it would be just and proper, if, the income from the transactions recorded in the seized diary are determined on the basis of highest peak, as increased by the net profit of 5 per cent on the receipts and taxed accordingly, for the relevant assessment years. We do not find that the CIT(A) and ITAT has committed any jurisdictional error in passing the impugned orders. [emphasis supplied] 8. ITO v. Bharat Plasto Chem (P.) Ltd. [2015] 58 taxmann.com 296 (Chandigarh - Trib.) III. Section 68 of the Income-tax Act, 1961 - Cash credit (Bogus purchases) - Assessment year 2009-10 - Assessee claimed that it made purchases from 'G', a company - Investigation made by Assessing Officer revealed that said concern was a bogus party created by assessee through whom no purchases were made and it was utilized for making bogus payments - Assessee was depositing cash in its bank account from which cheques were issued in name of bogus party and thereafter cash was withdrawn of equal amounts from bank account of said party - Assessing Officer treated same as unexplained credits and made addition - Whether since said exercise was being carried out from day-to-day, there was no merit in treating total deposits as unexplained credits and theory of peak credit was to be applied to work out addition - Held, yes [Para 19] [In favour of assessee] 4.3.3 In view of the above discussion and decisions cited, the AO was not justified in accepting plea of the appellant and thus, addition made by the AO amounting to Rs. 2,85,49,351/- is Deleted. Therefore, appeal on these grounds is Allowed. 23. The Ld. CIT(A) has given finding on the basis of the facts on record and the AO has not pointed out any defect in the cash flow statement produced by the assesse and prepared on the basis of the seized material itself. Accordingly we do not find any error or illegality in the impugned order of Ld. CIT(A) qua this issue. IT(SS)A No.145 & 146/Ind/2021 Vijeet Kumar Batter Page 34 of 34 Page 34 of 34 24. Ground no.2 is regarding the addition of Rs. 16,65,290/- made by the AO on account of undisclosed amounts advanced as loan u/s 69 of the Act which was deleted by the Ld. CIT(A). This issue is common as raised in ground no.1 for A.Y.2015-16. Accordingly in view of our finding on this issue for A.Y.2015-16 we do not find any error or illegality in the order of the Ld. CIT(A) qua this issue. 25. Ground No.3 is regarding the addition made by the AO on account of pawning business. This issue is common to the issue in ground no.2 for A.Y.2015-16. In view of the our finding on this issue for A.Y.2015-16, we do not find any error or illegality in the impugned order of Ld. CIT(A) qua this issue. 26. In the result, appeals of the revenue for A.Ys. 2015-16 & 2016-17 are dismissed. The Order is pronounced in the open court on 28.07.2023. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 28 .07.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore