Sri Lalit Kumar Todi, Kolkata V. DCIT,CC-3(1), Kolkata

ITSSA 151/KOL/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 4447 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 15-01-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 14-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAKESH KUMAR DAS; DR
• Assessee Lawyers: S. JHAJHARIA; AR
• Keywords: Document seized; Peak credit; Documents seized; Retraction; Search and seizure; Loose papers; Assessment record
• Section: 143(3); 250; 132; 153A; 139(1); 208; 194A; 69; 13; 69A

Judgement Text

| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI SANJAY GARG, HON’BLE JUDICIAL MEMBER & DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER I.T.(SS)A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi C/o M/s. Salarpuria Jajodia & Co. 7, C.R. Avenue 3 rd Floor Kolkata - 700072 [PAN : ABRPT2881Q] Vs Deputy Commissioner of Income Tax, Central Circle – 3(1), Kolkata अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri S. Jhajharia, A/R Revenue by : Shri Rakesh Kumar Das, CIT, D/R सुनवाई कᳱ तारीख/Date of Hearing : 16/01/2024 घोषणा कᳱ तारीख /Date of Pronouncement: 12/03/2024 आदेश/O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The present appeals are directed at the instance of the assessee against the separate orders of the National Faceless Appeal Centre, Delhi (hereinafter the “ld. CIT(A)”) of evenly dt. 17/08/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Years 2017-18, 2018-19 & 2019-20. 2. As the grounds of appeal raised by the assessee for all the three Assessment Years are identical except for variance in quantum, the grounds of appeal for Assessment Year 2018-19 are extracted for ready reference:- “1. For that in view of the facts and in the circumstances, the Ld. CIT(A) erred in holding that the documents seized in the premises of M/s South Calcutta Diesels Pvt. Ltd. i.e. SCDPL/13, SCDPL/14 & SCDPL/15 are incriminating documents pertaining to the appellant without appreciating 2 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi that the impugned documents were not seized from the possession of the appellant and in view of the facts and in the circumstances proceedings u/s 153 A did not lie in such respect and consequent addition made therein is bad in law and it may be held accordingly. 2. Without prejudice to Ground No. 1 above, the impugned documents i.e. SCDPL/13, SCDPL/14 & SCDPL/15 were "dumb documents" carrying no name of the appellant and merely contained rough and unsigned entries having no connection with the appellant and Ld. CIT(A) erred in upholding the same as documents for transactions carried on by the appellant and in view of the facts and in the circumstances it may be held accordingly. 3. For that in view of the facts and in tire circumstances, the Ld. CIT(A) erred in affirming the action of the AO in making the addition u/s 69 A without appreciating the law in such respect i.e. the ownership of any tangible assets i.e. money, bullion, jewellery or other valuable articles and none of any such asset was discovered /seized during such search and since the basic criteria for invocation of sec." „was not fulfilled, the impugned addition by AO and the affirmation of such action of AO by the Ld. CIT(A) in such respect is void ab initio and it may be held accordingly. 4. Without prejudice to Ground No. 3 above, the Ld. CIT(A) erred in affirming AO's action in invoking the provisions of sec. 69A without any specified asset having been found / discovered with the appellant and in view of the facts and in the circumstances the action of the AO and the affirmation of the Ld. CIT(A) is void ab initio and the addition so made is liable to be deleted and it may be held accordingly. 5. For that in view of the facts and in the circumstances, the Ld. C1T(A) erred in not appreciating that the impugned seized documents i.e. SCDPL/15 contained entries representing transaction between F.Ys 2016-17 to 2018-19 only (A.Ys 2017-18 to 2019-20 only) and for the purpose of invocation of "principle of peak credit" so accepted by the Ld. CIT(A), the alleged cash book being SCDPL/15 has to be considered only for the purpose of deriving peak credit of alleged transaction by the appellant and in view of the facts and in the circumstances it may be held accordingly. 6. Without prejudice to Ground No.5 above, the Ld. CIT(A) erred in observing and holding that the appellant was involved in granting and taking of loans & advances since earlier period and such presumption by Ld. CIT(A) is merely on conjecture and surmises without any evidence to such effect and in view of the facts and in the circumstances it may be held accordingly. 7. Without prejudice to Grounds No.5 & 6 above, the Ld. CIT(A) erred in considering the peak balances of individual ledger accounts contained in SCDPL/13 & SCDPL/14, although such peak credit should have been derived only on the basis of cash book as contained in SCDPL/15 and such peak credit 3 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi should have been derived out for the entire year and in view of the facts and in the circumstances it may be held accordingly. 8. Without prejudice to Grounds No. 5, 6 & 7 above, the Ld. CIT(A) erred in working out individual peak balances of the alleged parties in the ledger contained in SCDPL/13 & SCDPL/14, although the Ld CIT(A) himself has accepted that the entries in SCDPL/13 & SCDPL/14 were duly reflected in cash book at SCDPL/15 and hence the action of the Ld. CIT(A) is not in accordance with the law and the peak credit in such respect can be derived only out of SCDPL/15 for the period concerned and in view of the facts and in the circumstances it may be held accordingly. 9. Without prejudice to Grounds No. 5, 6, 7 & 8 above, the Ld. CIT(A) erred in deriving the peak credit at Rs.3,25,81,361/- on the basis of individual ledger balance and in view of the facts and in the circumstances the peak credit for such year only be Rs. (-) Rs.34,00,299/- along with the foundation money of Rs. 9,45,808/- and in view of the facts and in the circumstances it may be held accordingly. 10. Without prejudice to Grounds No. 5, 6, 7, 8 & 9 above, the peak credit for A.Y 2018-19 should've been derived at (-) Rs.34,00,299/- and only such amount could've been considered by AO/ CIT (A) for such year and in view of the facts and in the circumstances it may be held accordingly. 11. That the appellant craves leave to adduce additional grounds and / or to amend or withdraw any of the foregoing grounds on or before the hearing of appeal.” 2.1. For Assessment Year 2018-19 and 2019-20, the assessee has raised an extra ground which reads as under:- “11. For that in view of the facts and in the circumstances, the Ld. CIT(A) erred in not granting credit of peak balances of preceding year in the year under consideration and in view of the facts and in the circumstances the action of Ld. CIT(A) in such respect is bad in law and the credit for preceding year is available to the appellant in the year under consideration and in view of the facts and in the circumstances it may be held accordingly.” 3. Facts in brief are that the assessee is an individual earning income from salary, rental, dividend and interest income which is duly 4 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi disclosed in the return of income for the impugned Assessment Years filed u/s 139(1) of the Act. A search and seizure operation u/s 132(1) conducted on 13.1.2021 at the residential and business premises of “Todi Group” of concerns at Kolkata including individuals of the said group. There are mainly 3 smaller branches of ‘Todi Group’ comprising of 1) Sri Omprakash Agarwala and his family, 2) Sri Lalit Kumar Todi and his family & 3) Sri Vinod Kumar Todi and his family. The three branches taken together have cumulatively formed a bigger group called ‘Todi Group’. One of the premises, searched in such action u/s 132 (on 13.1.2021) located at 225D, A. J. C. Bose Road, Kolkata – 700 020 where apart from other documents etc. a bunch of documents marked as SCDPL 1 to SCDPL – 16 were seized on 14/15.1.2021 from the possession and control of the company M/s South Calcutta Diesels Pvt. Ltd. (in short “SCDPL”) and M. Vinod Kumar Todi and his relative Mr. Narayan Prasad Todi who belong to another branch of 'Todi Group' and such persons are the directors of the said company which has taken the said premises on lease from unrelated trust and the company is a lessee and occupier of said premises. 3.1. Though the assessee claimed to be not concerned or associated with the said concern M/s SCDPL, and his statement made u/s 132(4) in respect of seized documents have no validity and cannot be used as evidence against him, still the ld. Assessing Officer issued the notice u/s 153A of the Act. The appellant in response to notice u/s 153A filed return of income voluntarily including following sum based on information appearing on seized document SCDPL/15. 5 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi A.Y. Income declared (in Rs.) [in R.O.L u/s Included sums on account of SCDPL/13 - 15fin Rs.) 153A1 2017-18 82,31,330/- 79,77,775/- 2018-19 10,13,370/- - 2019-20 71,53,750/- 61,43,905/- Total 1,34,21,678/- 3.2. Thus appellant himself disclosed aggregate sum of Rs. 1,34,21,678/- income on account of transactions appearing in SCDPL-13 & 15 to buy peace of mind. During the course of proceedings, pursuant to issue of notice u/s 153A, ld. AO referred to the statement of Sri Lalit Kumar Todi (appellant) recorded u/s 132(4) and particularly relied on response by the appellant to Q. Nos. 44, 45 & 46 of such statement and concluded that such seized documents represented the "undisclosed loan business" conducted outside books in cash and thus proposed to treat such sum so reflected therein [ in document SCDPL-15 ] as "Undisclosed income" of the appellant. The AO also observed that SCDPL/15 is "Cash Book" whereas SCDPL 13 & 14 are ledger of parties whose transactions were reflected in alleged cash book, SCDPL/15 (Pages 12/88 of assessment order). The AO thus show caused appellant vide notice dt. 26.3.2022 and proposed to add the entire sum of credit entries in alleged cash book for A.Y 2017-18 at Rs.4,75,22,401/-, for A.Y 2017-18 at Rs.5,62,79,585/- and for A.Y 2019-20 at Rs.5,20,40,111/-. Appellant on its part duly responded vide letter dt. 30.3.2022 reiterating its stand that seized document SCDPL didn't belong / pertain to him and only to buy peace of mind it had to succumb to departmental pressure. Thus after working out the income out of such seized 6 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi documents SCDPL/15, it had offered sum aggregating to Rs. 1,34,21,678/- in its R.O.I. [Rs.72,77,773/- + 0 + Rs.61,43,905/-] filed in response to notice u/s 153A. However, the ld. AO treated the entire credit entries in such SCDPL/15 as income of appellant arising allegedly out of such undisclosed loan transaction conducted outside books and as such following undisclosed income of appellant computed:- Assessment year (a) Amount of receipt (b) j Amount assessed fc) 2017-18 4,75,22,401/- 4,84,75,960/- (including the sums in Column (b) and after deducting income declared Rs.72,77,773/-) 2018-19 5,62,79,585/- 5,72,79,585/- 2019-20 5,20,40,111/- 4,58,96,206/- (including the sum in Column (b) and after deducting income declared 61,43,905/-) 4. The appellant preferred an appeal before the Ld. CIT(A)-21, Kolkata against the order of Ld. AO raising grounds on merits as well as legal issue in additional grounds raised for not considering explanation filed before the DDIT (Inv.) and also not applying peak credit theory during hearing before ld. Assessing Officer. 5. The assessee had raised two issues before CIT(A). Issue No. I : Addition should not be made in respect of such seized documents SCDPL/13 – 15 since such documents did not belong / pertain to appellant. Moreover, provisions of sec. 69A could not be invoked since no corresponding asset in form jewellery etc. as enumerated in sec. 69A were found with appellant and hence provision 7 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi of section 69A fail to attract and hence no addition could have been made. Issue No. 2 : Without prejudice, even if such SCDPL/13 – 15 is treated as representing undisclosed income then also such alleged income has to be derived by following “Principle of peak credit” benefit of telescoping should be given for income of preceding year against the income computed for succeeding years which is peak credit worked out by appellant as follows :- A.Y. Peak balance 2017-18 (-) Rs.34,00,299/- 2018-19 (-) Rs.31,58,739/- 2019-20 (-) Rs.38,58,088/- 6. Appellant in addition to challenging the validity of such addition u/s 69A also prayed for application of peak credit since the AO merely considered the entire credit entry/receipt in the said documents without considering the principle of peak credit and telescoping and hence in any event the addition should be restricted to peak credit only especially in light of fact that appellant himself offered income based on SCDPL/13 to 15 thereby admitting such “Lending business”. 7. The Ld. CIT(A) after considering the submission of the assessee as well as assessment records, concluded as follows : a) As regards Issue No. I raised in Ground No.1 to 13 for the reasons as enumerated in pages 65 to 82 of his order, and the conclusive part of the order of Ld. CIT(A) reads under : 8 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi “The aforesaid provisions as well as the earlier discussions clearly indicate that a presumption exits against the appellant that such seized documents found during the search represent the undisclosed income of the appellant It has been found, in the earlier discussions that in the invocation of sec. 292C r/w sec. 132(4A) the law does not necessarily require the discovery of tangible assets etc. Once there is no denying the fact that the presumption u/s 132(4A) and 292C exists as soon as it is established that the said seized documents were found upon premises that were under the control of the appellant and that he had further given a detailed statement u/s 132(4) after examining such documents, which resulted in the said addition, it is difficult to see that basis for the appellant’s contention that such additions could not have been made u/s 69A. Section 69A of the Act clearly envisages that the assessee should be the ‘owner’ of moneys, etc. then if he offers no explanation with regard to these sec. 69A can be invoked In the present case, it is clear that the said seized documents reflected moneys of which the appellant was the owner on account of the presumption u/s 132(4A) and / or 292C of the Act. Once this fact has not been countered by the appellant, then it is difficult to see how he can, in the present circumstances, escape the provisions of sec. 69A of the Act. Therefore, on each of the counts raised by the appellant in these set of grounds, the appellant’s challenge fails and therefore these set of grounds stand dismissed.” b) As regards Issue No.2 regarding the contention of application of principle of peak credit and telescoping raised in Additional Grounds No. 1 to 6 on the basis of the cash book in SCDPL/15 representing alleged undisclosed income, the Ld. CIT(A) partly accepted the plea of the appellant and the discussion in such respect has been made by Ld. CIT(A) from pages 83 to 91 of his order The Ld. CIT(A)’s order at pages 9 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi 88 to 92 is reproduced hereunder to show the treatment so made by him in response to the plea of the appellant in respect of application of principle of peak credit. “I have gone through the content of the documents, SCDPL/13 to SCDPL/15 and I find that , as already discussed earlier, there is no doubting the fact that SCDPL/15 is indeed the cash book of the appellant’s undisclosed cash transactions of advancing and receiving amounts in cash. Similarly, SCDPL/13 and SCDPL/14 do indeed contain he individual ledgers of the parties in respect of which the entries have been made in the ‘cash book’ of lending transactions carried on as SCDPL/15. I have test checked the entries which appear in SCDPL/13 and SCDPL/14 and found ah the same are being reflected in SCDPL/15. Therefore, I can find no fault in the AO’ finding that the SCDPL/15 represented the cash book of the appellant’s undisclosed cash transactions Similarly, I also find that the AO has correctly accepted that SCDPL/13 and SCDPL/14 represent the individual ledgers of the parties whose transactions are listed in SCDPL/15. It may not be out of place to once again reiterate that it is the appellant himself who had offered these explanations in his statement during the search. In the background of the appellant’s contentions, upon perusal of the ledgers SCDPL/13 as well as SCDPL/14 in conjunction with the cash book of undisclosed cash transactions SCDPL/15. I find that while agreeing with the essential principle put forth by the appellant I cannot agree with the analysis done by him in this regard. I find that the ledgers reflected in SCDPL/13 and SCDPL/14 contain several receipts from parties without any earlier payments having been made to these parties. The working of peak credit by the appellant in this regard is fallacious in so far as it does not take into consideration the 10 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi actual and admitted business of the appellant in this regard. A peak credit, in the case of a person conducting an activity of advancing and receiving cash amounts of loans from a huge number of clients cannot be worked out by simply taking the difference of the credits and debits and thereby working out the balances, thereby arriving at the peak credits for each AY. The simple reason for this is that if the ledgers of each of the clients is worked out, it is found hat in several cases these clients have returned amounts of moneys to the appellant, which had not been reflected as having been earlier paid to them by the appellant within the ambit of the undisclosed cash book SCDPL/15. Therefore, if those moneys were being returned to appellant which the cash book for the period did into reflect as having earlier been advanced to these clients and if the entire set of such cash transactions was admittedly reflected in this cash book of undisclosed cash transactions, then this could happen only if these amounts had been already advanced by the appellate from a corpus in the hands of the appellant that did not find reflection in the said cash book SCDPL/15, since only transactions for a finite length of time were reflected in the cash book that was seized during the search. Putting it in another way, if the appellant was shown to have received an amount from a party, and this amount – as per the said cash book was not shown to be advanced to this party, then the onus for proving that this earlier advance had been made by the appellant through sources that had already been brought to tax, lay squarely upon the appellant. While these earlier transactions, in the form of cash advances (that were subsequently being shown to have been repaid) were not reflected in the said cash book, the ledgers themselves pointed to and proved the existence of these advances that had earlier been made by the appellant. Since these ledgers were also part of the seized books, the presumption lay against the appellant and it 11 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi was he who had to prove / explain these transactions with evidence. These amounts brought to attention a hidden corpus in the hands of the appellant in the form of advances already made by him to various clients which exists in the form of money already in the market that were now being repaid by these clients. If the presumption of this corpus existing in the form of money advanced in the market (and duly reflected in the ledgers) had to be rebutted, then the appellant would have to show that these amounts were being returned out of the advances that he had made from amounts in his hands that had already been brought to tax. No such explanation nor evidence has been offered by the appellant. Therefore, it stands to reason that the peak credit should be worked out on the basis of and by also reading the peak balance in each of the individual balances appearing in the ledgers SCDPL/13 and SCDPL/14 along with the main cash book - SCDPL/15. Accordingly, the appellant was called for and asked to explain the same under the provisions of sec. 250(4) of the Act. In response the appellant has filed a submission wherein he has fairly accepted the aforesaid principle. He has made an alternative submission fide letter dt. 31.7.2023 wherein a comprehensive analysis has been undertaken and peak credit of each of the ledger account has been worked out and thereby the peak credit on the basis of aggregate of all such peak balances of the individual ledger accounts have been aggregated and the peak credit for each of the 3 years involved is worked out as under : AY Peak balance 2017-18 Rs.3,25,81,361/- 2018-19 Rs.1,56,68,847/- 2019-20 Rs.77,41,208/- 12 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi To the amount for AY 2017-18, also has to be added the seed money, as already discussed, amounting to Rs. 9,45,808/-. The above working has been made in such a way as to work out the peak credits for each and every year separately after taking into account all aspects for example, the giving of benefit of the peak credit for one year, in the subsequent year. Therefore, no further benefit needs to be given in the above peak credits for the three AYs. For example, if the peak credit for any particular year turns out to be more than the peak credit for the subsequent year, in normal circumstances of application of peak credit theory, credit has to be given in the subsequent year. In the present circumstances, this does not have to be done because the individual the peak credits for each and every individual party is being worked out for each year and all variations are automatically absorbed in these workings since these individual accounts themselves span across more than one assessment year and over strong indicators of large sums floating around in the market – as undisclosed cash loan advances. There is therefore no need to reduce the peak credit available in AY 2017-18. Hence while accepting the contention of the appellant in respect of peak balance for each of the years I am of that opinion that the actual admitted cash transaction business of the appellant should be taken into consideration while working out these peaks. In accordance with this procedure the peak balances as worked out above and accepted by the appellant vide his letter dt. 31.7.2023, have to be individually taken as the undisclosed income worked out for the appellant for the three assessment years mentioned above. The AO’s order of treating the entire receipts appearing in SCDPL/15 is accordingly modified to such extent i.e. Rs. 77,41,208/-. The appellant has further contended that he had disclosed a sum of Rs. 72,77,773/-in AY 2017- 18 and Rs.61,43,925/- for A.Y 2019-20 based on the same undisclosed sources 13 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi of income in its return of income u/s 153A of the Act. These amounts, already disclosed by him in his return, therefore need to be reduced from the quantum of undisclosed income determined above for the concerned years in which such disclosure had been made in the return of income. He has pointed out that the AO, in his order, had accepted this plea and had in fact reduced he said amount from the undisclosed income determined by him. I find substantial force in the argument of the appellant also the AO in it order so passed u/s 153A/ 143(3) had also considered and allowed credit for the same and hence the AO is directed to verify the same from records and if true, to reduce such sum from peak balance so worked out as directed above. Hence, the AO is directed accordingly.” [Emphasis supplied by us] 11. Aggrieved, assessee is now in appeal before this Tribunal. 12. Ld. Counsel for the assessee has humbly made the following submissions before this Hon’ble Tribunal stating :- A. As regards Issue No. I (Grounds No. 1 to 6) : The aforementioned grounds No. 1 to 6 pertain to AO’s action and affirmation of such action by Ld. CIT(A) and it is contended that- i) That the appellant had duly retracted from his statement u/s 132(4) on 14.1.2021 and 12.3.2021 and hence the impugned statement cannot be given any cognizance especially in absence of any corroborating evidence and also counter opposition to such retraction by revenue at any time after such retraction which duly substantiates the facts mentioned in such retraction. ii) That the impugned admission and disclosure even in R.O.I. was only under pressure of IT Department and merely to buy peace of mind and the same 14 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi cannot be any criteria for treating the appellant as liable for such alleged undisclosed transaction. iii) Such “loose documents” [i.e. SCDPL / 1 to 16 and particularly SCDPL / 13 to 15] were not found in its possession of appellant but in possession of lessee & occupier of premises and also do not belong to /pertain to appellant or even for that matter of occupier of such premises as well. Investigation Team and by Ld. AO has merely thurst name of appellant of such occupier on such alleged loose documents arbitrarily. iv) Such “loose documents” are not “books of account” and cannot be basis for any addition, especially u/s 69A. v) Such “loose documents” are rough, casual papers and are dumb documents and hence no addition can be made based on the same. Even AO failed to conduct any enquiry in respect of alleged parties to such alleged loan transaction. vi) Such “loose documents” do not come within the purview of 69A. vii) Addition u/s 69A “san any incriminating material” is bad in law and hence addition so made in such respect has no legal sanctity, viii) Appellant was not found owner of any tangible asset like money, bullion, jewellery or other valuable asset or article physically found and hence entire addition is baseless and hence provision of sec. 69A cannot be invoked. 15 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi In this context, it is pertinent to mention that the ownership and source of both (i) the amount of cash found and seized or unseized from the Todi Group of concerns including Individual family members and also (ii) the jewellery & ornaments belonging to the family members of the Group found but not seized and valued by the Departmental Valuer have been primarily explained in course of search and further explained satisfactorily in the detailed written submission dt. 14.03.2022 and the same have been fully accepted by the AO. Being fully satisfied and with full application of mind, no amount of the said cash and value of jewellery & ornaments has been added by the A.O in the search assessments of any concern and family member of the Todi Group, which proves beyond dispute that no portion of the said cash and jewellery represented unexplained money or asset which can attract the provision of section 69A of the Act. In that specific background of full acceptance by the A.O of the entire cash and jewellery found on search as undisputably explained without resorting to any addition in any search assessment, it is fallacious on the part of the A.O to presume differently without any proof whatsoever that the appellant was found to be owner of any tangible asset like money, bullion, jewellery or other valuable asset or article physically found on search which are prima facie unexplainable attracting the provision of section 69A of the Act. No such existence of tangible asset found on search could be detected and identified by the A.O which according to him was prima facie unexplained. It needs to be emphasized that the loose sheets / diaries / khatas seized from M/s SCDPL and relied on by the A.O do not at all represent tangible assets stipulated in section 69A of the Act. Invocation or application of section 69A by the A.O is totally a misdemeanor contrary to the facts and the law. In the background of aforesaid facts Ld. 16 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi CIT(A) erred in not accepting this plea of appellant and thus wrongly affirmed AO’s decision in making such addition u/s 69A. Hence it may be held accordingly. B. Issue No. 2 (Grounds No. 7 to 10) : As regards the Issue No 2, so raised in grounds No. 7 to 10 before this Hon’ble Tribunal i) Ld. CIT(A) rightly dismissed the AO’s action in adding merely all the receipts in the said loose documents (SCDPL/13, SCDPL/14 and SCDPL/15) and denied treating the name as :alleged undisclosed transaction”. Ld. CIT(A) worked out on peak balance theory however Ld. CIT(A) unjustifiably worked out “peak balance of each of ledger yearwise” and appellant disputes such part of decision of Ld. CIT(A). ii) Ld. CIT(A) was not justified in not considering the peak credit of the alleged undisclosed income on the basis alleged loose documents (SCDPL/13, SCDPL/14 and SCDPL/15) and if any addition could have been made then only the “peak credit balance” as worked out based on cash book at SCDPL/15 treating the entire transaction of “LENDING” out of books as one and thus peak credit has to be worked out for the year as a whole and not partywise. Appellant thus submits that only such sum worked out of cash book SCPL-15 and for the year as a whole and only the same sum (i.e. peak credit of the year) could have been only added in the hands of the appellant. Ld. CIT(A) wrongly considered the individual peak balances of cash ledger of each of the parties [so worked out by appellant before CIT(A)]. Ld. CIT(A) while working out “peak credit” of such individual parties merely assumed that the appellant was having transaction with such parties since earlier year and thus concluded that the transaction with such parties spanned in earlier year as well and such sum has been returned by those parties in A.Ys 2017-18, 2018-19 & 2019-20 and hence 17 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi individual “peak credit” of each individual party for each year was worked out. Further, the Ld. CIT(A) also denied the benefit of telescoping in preceding years to sum determined in succeeding years. Such action of Ld. CIT(A) is flawed and unjustified since. iii) There is no evidence or any material which reflects the alleged loan transaction of earlier years as alleged by Ld. CIT(A) and indeed the alleged cash book as well as corresponding ledger in SCDPL/15 & SCDPL/13 – 14 respectively merely contained entry which had entries only of A.Ys 2017-18, 2018-19 & 2019-20. Indeed there is no finding even by AO in such respect and hence the assumption in such respect by Ld. CIT(A) is baseless and not corroborated by any evidence and hence Ld. CIT(A)’s conclusion in such respect needs to be rejected accordingly. iv) Without prejudice, the cash book in SCDPL/15 contains all the entries as in SCDPL/13 & 14 as corroborated by AO. The addition if any has to be restricted to such cash book only treating the transaction of taking loan and grating loan as one business only and considering the fact that appellant had received loans as well wherefrom loan has been extended and vice-versa. Thereby the income has to be derived by following “principle of peak credit and telescoping” accordingly and on these principles the peak credit is as follows : - A.Y. Peak credit 2017-18 (-) Rs.34,00,299/- 2018-19 (-) Rs.31,58,739/- 2019-20 (-) Rs.38,58,088/- 18 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi v) In the background of the fact that appellant had itself disclosed in its R.O.I. u/s 153A income based on entries in SCDPL/13 to 15. It shows that it had accepted such lending business being out of books and in the background of same following the below mentioned judicial precedents the peak credit should be derived by aggregating all such entries which are reflected in the cash book at SCDPL-15. Such judgments are as follows : - a) Bhaiyalal Shyam Behari v. CIT (2005) 276 ITR 38 (All.) b) Dilip Kumar Nahata v. DCIT, Central Circle – ITA 141/K/2012 dt. 9.5.2012 c) Bhagdev Roy v. ACIT – ITA 832/K/2013 dt. 31.3.2017 vii) In respect of application of “principle of peak credit” as well as telescoping attention is drawn to the following judicial precedents as well : 1. Saral Plastics Pvt. Ltd. v. ITO [ITA 3118 & 3063/Ahd/2013 dt. 25.5.2017] 2. S.R. Enterprise v. ITO (2002 77 TTJ 69 (Ahd.) 3. ITO v. Uday Shankar Mahawar [ITA No.1903/Kol/2009 dt. 16.07.2010] 4. Chetan Gupta v. ACIT [2013] 34 taxmann.com 306 /144 ITD 344 (Del) viii) Even otherwise and without prejudice the appellant having already declared the income out of SCDPL/13 – 15 at Rs.1,34,21,768/- such addition even in respect of peak credit as above cannot be more than such sum already declared and taxed. 13. On the other hand, the ld. D/R supported the order of the ld. CIT(A) stating that the assessee is admittedly engaged in undisclosed business of cash loans and documents were seized showing details of various persons to whom loans have been given and received and interest income has also been earned. He also stated that in various 19 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi ledger accounts, opening balance are appearing and in some cases, amount has been returned back. Considering all these aspects, the ld. CIT(A) has rightly adopted the theory of peak credit for each individual account. Reliance placed on the finding of the ld. CIT(A). 14. We have heard the rival contentions and perused the material placed before us and carefully gone through the decisions relied on by the ld. Counsel for the assessee as well as those referred in the impugned order. The assessee which belongs to the Todi Group, was subjected to search u/s 132 of the Act conducted on 13/01/2021. During the course of search, pages bearing no. 208 to 210 of documents seized under ID SCDPL/15 as well as copies of pages bearing no. 104,105,108 and 109 seized under ID SCDPL/14 and pages appearing at pages 92,93,98 and 99 of documents seized under ID SCDPL/13 were found. These seized documents contained several day to day transactions made in cash. The seized documents SCDPL/15 is a cash book which reflects the details of cash transactions of the group excluding the cash loans given/taken, cash payments to creditors and cash receipt from debtors and SCDPL/13 & SCDPL/14 contains individual ledgers. The assessee has accepted that all these seized documents belong to him and transactions entered through various persons in cash modes appearing in the seized documents are being carried out by him. The revenue authorities after examining these seized documents found that the following cash credits which are spreading over Financial Year 2016-17 to 2018-19 are unexplained:- 20 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi Financial Year Assessment Year Amount 2016-17 2017-18 Rs. 4,75,22,401/- 2017-18 2018-19 Rs.5,62,79,585/- 2018-19 2019-20 Rs.5,20,40,111/- 15. Thereafter, at the conclusion of the assessment proceedings, the assessee made a voluntary disclosure for the undisclosed income from the alleged cash transactions and for Assessment Year 2017-18, voluntary disclosure made at Rs.72,77,773/-, for Assessment Year 2018- 19 at Rs. NIL and for Assessment Year 2019-20 at Rs.61,43,905/-. The ld. Assessing Officer reduced the voluntary disclosure made by the assessee from the amount computed for Assessment Year 2017-18 and 2019-20 and for the remaining amount, additions were made. Thereafter, the assessee challenged these additions before the ld. CIT(A) wherein it was submitted that in view of the settled judicial precedents, and considering the nature of transactions found in the seized material, peak credit theory should be applied and if the total transactions are taken into consideration, the peak balance would be as follows:- Assessment Year Peak balance 2017-18 (-)34,00,299/- 2018-19 (-)31,58,739/- 2019-20 (-)38,58,088/- 16. The ld. Assessing Officer after considering the arguments of the assessee and ratio of various decisions referred and relied, accepted the contentions that addition in the instant case based on the seized material can be made only on the peak credit theory. However, the ld. CIT(A) on 21 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi perusal of the records noticed that the individual ledger accounts have their connection with the transactions entered in the preceding years and, therefore, cumulative peak credit theory cannot be applied and the peak credit theory needs to be applied by taking into consideration, each individual accounts. The ld. CIT(A) accordingly sustained the addition on the basis of peak balance theory to the following amounts:- Assessment Year Amount 2017-18 Rs.3,25,81,361/- 2018-19 Rs.1,56,,68,847/- 2019-20 Rs.77,41,208/- 16.1. While sustaining the addition, the ld. CIT(A) did not give the telescoping benefit of the peak balances of Assessment Year 2017-18 against the peak balances for Assessment Year 2018-19 and consequently. The peak balances have been arrived at by adding up the peak balances of each individual account. Now, before us the assessee has commonly raised two issues, firstly, that the alleged seized documents are dumb documents and are rough and unsigned entries having no connection with the assessee and, therefore, no addition should have been made. Second issue raised is that the seized documents has to be read in its entirety and they all being part of the business of receiving and paying cash, peak balances of the total business should have been calculated and subjected to tax. 17. So far as the first issue is concerned that the impugned has been made on the rough unsigned documents, we fail to find any merit in the same because in view of provisions of Section 292C r.w.r. 194A of the 22 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi Act, the alleged documents were found with the possession of the assessee and in the statement given u/s 132(4) of the Act, it was admitted that the transactions appearing in the seized documents belong to the assessee group. Even the assessee has voluntarily disclosed income calculated on the basis of alleged seized documents. Therefore, Ground Nos. 1, 2, 3 & 4 raised by the assessee are hereby dismissed. 18. Second fold of contention which has been raised from Ground Nos. 4 to 10 is that the peak credit theory should have been applied on the total lending business volume carried out during the year and the assessee also deserves telescoping benefit against the income of an year from the income offered in the preceding year. As per the assessee, if the principle of peak credit is applied on the total volume of transactions appearing in the seized documents, the peak balances would be:- Assessment Year Peak balance 2017-18 (-)34,00,299/- 2018-19 (-)31,58,739/- 2019-20 (-)38,58,088/- 19. We on perusal of the seized documents bearing no. SCDPL/13-15 which are reproduced in the assessment order, notice that the transactions are only pertaining to 2016-17 to 2018-19. This fact is admitted by the revenue authorities also. As held consistently by various judicial forum in search cases that the income has to be calculated strictly only the basis of seized material and no extrapolation theory can be applied. The transactions appearing in the alleged seized 23 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi documents prima facie seems to be of the finance/lending business carried out by the assessee wherein there is regular inflow and outflow of cash amidst various persons. Ledger account of these persons are also available in such seized material. Now, once the revenue authorities have considered that all the alleged seized material belongs and pertains to the assessee and the assessee has also admitted that these are part of the lending/finance business carried out by him then income has to be calculated based on the total transactions carried out during the year in that particular business treating as one unit. 20. We notice that the ld. CIT(A) has though rightly adopted the peak credit theory but erred in calculating the peak balance of each individual account. We fail to find any merit in such action of the ld. CIT(A) because the seized material in itself speaks that they are part of the lending/finance business carried out by the assessee and based on such seized material, which contains cash book as well as ledger account and the peak balances on a particular date during the relevant year has to be treated as the undisclosed income because there is a regular inflow and outflow of cash and may be at a certain point of time, there is inflow of cash from some parties but correspondingly, there is outflow of cash to other parties and also since the alleged seized material is not part of a systematically maintained accounting system and are more like the entries made in a single entry system of accounting. 20.1. Now, the best way for calculating the income of the assessee can be only on the basis of applying peak credit theory treating the total 24 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi seized material as part of one unit of finance/lending business. We observe that the peak credit calculated by the assessee as follows:- Assessment Year Peak balance 2017-18 (-)34,00,299/- 2018-19 (-)31,58,739/- 2019-20 (-)38,58,088/- 20.2. The above working of peak theory has not been disputed by the revenue authorities at the appellate stage, therefore, the same is found to be correct. For such application of peak credit balance theory and treating of seized material in entirety for a particular year for calculating undisclosed income, we find support from the following decisions:- a) Bhaiyalal Shyam Behari v. CIT (2005) 276 ITR 38 (All.) b) Dilip Kumar Nahata v. DCIT, Central Circle – ITA 141/K/2012 dt. 9.5.2012 c) Bhagdev Roy v. ACIT – ITA 832/K/2013 dt. 31.3.2017 Thus, assessee succeeds in the grounds raising this issue of applicability of peak theory. 21. As far as the issue of telescoping benefit is concerned, we find merit in the contention of the ld. Counsel for the assessee because if any addition is made in the hands of the assessee for a particular year, then, such amount is available with him for being utilised in the business for subsequent year and, therefore, the assessee deserves the telescoping benefit during Assessment Year 2018-19 if the peak credit addition made for Assessment Year 2017-18 and similarly, telescoping benefit for Assessment Year 2019-20 from the peak credit addition made for 25 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi Assessment Year 2017-18 and 2018-19. Our view is supported by the following decisions:- 1. Saral Plastics Pvt. Ltd. v. ITO [ITA 3118 & 3063/Ahd/2013 dt. 25.5.2017] 2. S.R. Enterprise v. ITO (2002 77 TTJ 69 (Ahd.) 3. ITO v. Uday Shankar Mahawar [ITA No.1903/Kol/2009 dt. 16.07.2010] 4. Chetan Gupta v. ACIT [2013] 34 taxmann.com 306 /144 ITD 344 (Del) 21.1. Therefore, in view of the above settled judicial precedents, this plea of the assessee of getting telescoping benefit for undisclosed income offered to tax in the preceding year against the undisclosed income for the current year is allowed. However, since the income from finance business declared by the assessee for Assessment Year 2017-18 to 2019-20 at Rs.72,27,773/- and Rs. 61,45,405/- for Assessment Year 2019-20 and the same is much more than the peak credit balance calculated on the basis of the transactions appearing in the seized material, the voluntary disclosure made by the assessee based on the material being higher than the peak credit balances should be accepted as peak credit balances. To conclude, considering the peak balance calculated by the assessee on the basis of seized material for Assessment Year 2017-18 to 2019-20 and also considering the income offered in the income tax return for Assessment Year 2017-18 and 2019-20, we are inclined to hold that the undisclosed income from lending/finance business for Assessment Year 2017-18 is Rs.72,27,773/- and Rs. Nil for Assessment Year 2018-19 after considering the telescoping benefit theory available out of the income offered for Assessment Year 2017-18 and for Assessment Year 2019-20, the undisclosed income is held to be 26 I.T.(SS).A. No. 151, 152 & 153/Kol/2023 Assessment Year: 2017-18, 2018-19 & 2019-20 Shri Lalit Kumar Todi Rs.61,45,405/-. In other words, the undisclosed income offered by the assessee in the income tax return is found to be correct. Thus, on merits, the assessee partly succeeds. Accordingly, the common grounds raised in Ground Nos. 5 to 10 are hereby partly allowed. 22. In the result, all appeals of the assessee are partly allowed. Order pronounced in the Court on 12 th March, 2024 at Kolkata. Sd/- Sd/- (SANJAY GARG) (DR. MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated 12/03/2024 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Assessee 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata