DCIT(CC)-2(4), MUMBAI., MUMBAI vs. AVEO PHARMACEUTICALS PRIVATE LIMITED, MUMBAI

KANT, AM appeals by the Revenue and c e are directed against a comm by the Ld. Commissioner mbai [in short ‘the Ld. CIT(A)’]
2021-22. As common grounds h nd therefore, same were hear y of this consolidated order f e up the appeal of the Reven ssee for assessment year 2020-2
ue in its appeal are reproduced a n the facts and circumstances of the cas red in directing the AO to delete the addi restricting the unexplained expenditure g into consideration the fact that the asse vide any cogent explanation/material wi during the assessment proceedings".
n the facts and circumstances of the cas rred in applying the Peak Credit Theor he fact that the assessee had failed to p as to how the expenditure incurred wa ts business and hence was directly lin aised by the assessee in its cro
:
harmaceuticals Pvt. Ltd
2
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
cross-objections mon order dated of Income-tax for assessment have been raised rd together and for the sake of nue and cross-
21. The grounds as under:
se the Ld.
ition made u/s. 69C essee had ith respect se the Ld.
ry without provide an as for the ked to its ss-objection are 1. The notice juri iction, n
2. The ord
51.03.2022 is 3. The Ld. C addition in re
Shri. Vinod K appellant.
4. All the prejudice to e
3. At the outset, w none attended on b application was filed assessee was not int same were heard e arguments of the Ld.
4. Briefly stated, f action carried out b seizure different dru company, a search
Director of the comp foreign currency was NCB was requisitione of the Income-tax Ac proceeding u/s 153A case of the assessee.
for the assessment y
Aveo Ph
ITA Nos. 3009
CO No.

e u/s. I53A of the Act dated 28.06.2021
non-cst. invalid and bad in law.
der u/s. 143(3) r.w.s 153 A of the A s non-est. invalid and bad in law.
CIT(A) erred in law & facts in not appreci espect of the documents (bund at the p
Kumar Sharma was warranted in the ca above grounds are independent and ach other.
we may like to mention that d behalf of the assessee nor an d and therefore, we were of th terested in prosecuting the app ex-parte qua the assessee aft
Departmental Representative (D facts of the case are that in vie by the Narcotics Control Bur ugs tablets from import cons was also carried out at the r pany and certain loose docume found and seized. The docume ed by the Income-tax Departme ct, 1961 ( in short the Act) an A of the Act was initiated and ca
. Thereafter, the assessee file re year under consideration declari harmaceuticals Pvt. Ltd
3
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
is without
Act dated iating [hat premise of ase of the d without despite notifying ny adjournment he opinion that peal and hence, ter hearing the DR).
ew of the search reau (NCB) and ignment of the residence of the ents along with ent seized by the ent u/s 132A(1) nd consequently arried out in the eturn of income ing total income at Rs.1,19,64,700/-.
Officer made addition of the Act amoun expenditure u/s 69C this manner, total a made. The assessme u/s 153A r.w.s. 143(3
4.1 On further app cash receipt from p relevant part of the o
6.1 Decision assessment observed that is:-
(i) Cash recei residence of unexplained r
2020-21 'aggr
(ii) Cash paym residence of unexplained e
Asses
Α.Υ. 2020-2
With regards perusal from as per AO, following doc unexplained r

Assessment Year
Aveo Ph
ITA Nos. 3009
CO No.

In the assessment completed n in respect of unexplained cash nting to Rs.1,31,15,474/- an C of the Act amounting to Rs.
addition amounting to Rs.2,29
ent in the case of the assessee
3) of the Act on 31.03.2020. peal, the Ld. CIT(A) upheld the para 6.1 to 6.6 of the impug rder is reproduced as under:
on Ground No. 1 and 2: From perusa order and submissions of the appell t the issue involved in the year under con ipt vouchers found during the search b f
Shri
Vinod
Kumar
Sharma rep receipts pertaining to F.Y. 2019-20 releva regating to Rs. 1,31,15,474. ment vouchers found during the search b f
Shri.
Vinod
Kumar
Sharma rep expenditure pertaining to year:- ssment Year
Amount
21
98,45,506/- s to the issue related to unexplained r the material placed on record, it is obse out of the total seized loose papers cuments in respect of receipt vouchers, receipts of the appellant:- r
Document ref no.
Aggregate harmaceuticals Pvt. Ltd
4
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
d, the Assessing h receipt u/s 68
nd unexplained
98,45,506/-. In 9,60,980/- was was completed addition of the gned order. The l of facts, lant, it is nsideration by NCB at presenting ant to A.Y.
by NCB at presenting receipts, a erved that by NCB, represent e Amount

A.Y. 2020-21

(inR
D-47, D-57, D-55, D-
58,D12, D-45, D-48, D-49,
D-50, D-66, D-61, D-46 D-
60
1,31,15
Total
1,31,15
O, during the course of assessment, .had ok, bank book and financial statemen nvoices raised to the different parties ated to impounded documents D-l to the same, the appellant had submitted f as well as that of M/s, Westfin Interna med that the bills / invoices related to cas re raised by M/s. Westfin International n of assessee) to its clients and said cash d to receipts of amounts which were e banks of M/s. Westfin International Pv o claimed that the cash vouchers of rece pute the commission to be given to agents er, the AO, in the assessment order for A nded that the receipts recorded in abov rs has remained unexplained due to mentioned in the cash vouchers of rece m the names mentioned in the final invoice amount of invoices were raised in the es, and the amounts have been receive nnel, which gives no reason to the assesse s.
ting documents have been submitted rega of commission of agents / invoices rais r giving multiple opportunities to the asse s reiterated its same submission.
st this, the appellant during the course of has filed its submissions. From the subm served that the appellant has resubmitte and explanations in respect of the cas ncerned which were provided by it b wing as well as during the as harmaceuticals Pvt. Ltd
5
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
Rs.)
5,474/-
5,474/- called for nts of the s by the D-97. In the cash tional Pvt- sh receipts l Pvt. Ltd.
h vouchers e already t. Ltd. The eipts were s in cash.
A.Y. 2020- ve referred following eipts were es.
names of d through ee to raise arding the ed by the essee, the f appellate missions, it ed various sh receipt before the ssessment proceedings.
for A.Y. 2020
vouchers wer note the fore
Westfin Intern the appellan business of enclosed sev remittance ce on perusal of and amounts mentioned on given by the prepared for same contain document. Fu has merely
However, in corroborative genuine expla
6.6 In view o
AO with regar
6.2 above an represents u for A.Y. 202
4.1 Thereafter, in r
CIT(A) found the ex explained and a Rs.1,40,92,307/- was paragraphs of the im
6.7 Fur unexplained placed on re total seized respect of appellant:-
Aveo Ph
ITA Nos. 3009
CO No.

The appellant in its submission dated 03
0-21 has claimed that some of the cas re prepared merely for internal record p ign remittances towards export sales re national Pvt. Ltd. which is the sister co t company and deals with the expo the appellant. In support of the sam veral export invoices, shipping bills ertificates, packing lists, airway bills etc.
f said documents, it is seen that the nam mentioned by the appellant is different t n the supporting evidences. Further, the ex e appellant that the cash vouchers we internal record purpose cannot be accept ns the name of the appellant on eac urther, with respect to one document, the claimed that the same was wrongly n absence of any documentary material, the same cannot bé cons anation.
of above, I find no infirmity in the obser rds to the cash receipt vouchers referred d therefore the AO has rightly held that unexplained business receipts of the 0-21. espect of vouchers of the expen penditure to the extent of Rs.
addition for the balance e s sustained subject to peak cred pugned order are reproduced as rther, with respect to the issue re expenditure, a perusal from the ecord, it is observed that as per AO, o loose papers by NCB, following docu represent unexplained expenditure harmaceuticals Pvt. Ltd
6
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
3.01.2024
sh receipt purpose to eceived in oncerns of rt related me, it has s, inward
However, mes, dates than those xplanation ere merely ted as the ch of the appellant prepared.
evidence/
sidered a rvations of to in para the same appellant nditure, the Ld.
.25,94,699/- as expenditure of dit. The relevant s under:
elating to material out of the uments in e of the Assessment
Year

•A.Y. 2020-21

Total

Document ref no.

Aggregate Amou
In Rs.)
D-13,D-16,D-17,D-18,
0-19, D-20, 0-25, D-29,
0-32, D-33, D-34, D-35,
D-37, D-40, D-41, D-42,
D-43, D-44, D-14, D-24,
D-26, D-27, 0-28, D-30,
D-67, D-68, D-21, D-74
andD-75

98,45,5067-

98,45,5067- er, the AO, based on the explanati s made in the assessment order for ideration has contended that the p above referred cash vouchers has r due to following reasons:- ysis, it was seen that most of the pay ash vouchers were related to com or which no cogent evidences ha nd no IDS was deducted by the assess ce of cash for cash payment were y the assessee- were also payments against which p e submitted, however, no explanat s to why cash vouchers were raised.
stance, amount mentioned in voucher
19, Rs.32,00,000], assessee subm of Westfin& Aveo, which showed
Rs.20,00,000/-[dt.19.12.2019] was ugh bank and Rs.12,00,000/- [dt.20. by Aveo again through bank. How nk book entries did not match with ised and it was also not properly expl harmaceuticals Pvt. Ltd
7
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
unt ions and the year payments retnained yments as mmission ave been see.
also not purchase tion was r No. D-68
mitted the that the made by .12.2019]
wever, the the cash lained by the assessee these transa
(v)Dates in vouchers rai
(vi)From the had done m material or p not able to s
6.9 The sub course of th years have explanations vouchers con
D-44, D-43,
21, D-20, D- has submitt have alread appellant. Fu date of paym book. also description o
Further, wit incurred by that the sou the ordinary were alread also offered the appellan contention of with respect said voucher made to on assessee ha by M/s. We channels a statement of respect to D
1,82,000/-
1,18,000/- w
Ltd. and Rs.
Aveo Ph
ITA Nos. 3009
CO No.

e as to why cash vouchers had been r actions.
bank book entries did not match w sed.
voucher details, it is clear that the most of payments in cash, be it pur payment of commission and the asses atisfactorily explain the discrepancies bmissions made by the appellant du hese appellate proceedings in each been considered. From the submiss s of the appellant, it is seen that in r ntained in documents D-40, D-41, D-4
D-34, D-35, D-67, D-32, D-33, D-29,
-19, D-18, D-16, D-17 and D-13, the ted cash book evidencing the fact t dy been recorded in the cash book urther, in respect of these vouchers, t ment, amount of payment as entered matches with the date, name, amo on cash vouchers generated by the a th respect to the source of said exp the appellant, the appellant has s urce of said expenditure was cash re y course of appellant's business an y recorded in cash book of the appe to tax. On detailed perusal of the cas nt and details of sales of the appe f the appellant is found to be correct.
t to the cash voucher D-67, the desc r states that the payment of Rs.5,00,0
ne M/s. Vanilla Food Products Pvt.
as explained that the said payment w estfin International Pvt. Ltd through and had also submitted extract f M/s. Westfin in this regard. Furth
D-21, the appellant has explained was paid in cash by the appell was paid by M/s. Westfin Internati
. 5,00,000/- represents exchange val harmaceuticals Pvt. Ltd
8
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
raised for with cash assessee rchase of ssee was s.
uring the of these sions and respect of 42, D-37,
D-25, D- assessee that they ks of the the name, into cash ount and appellant.
penditure submitted eceipts in nd which llant and h book of llant, the . Further, cription of 000/-was Ltd. The was made banking of bank her, with that Rs.
lant, Rs.
ional Pvt.
lue of old machinery. I copy of cas
M/s. Westfin
6.10 Further with the obs para 6.8 a appellant ha the expendi appellant do terms of dat made, amou in cash boo
Westfin Inter
6.11 Accordi of Rs.1,66,8
98,45,506/-
2021-221, I vouchers to and in respe the same rep over the peri to A.Y. 2019
4.2 Thereafter, the theory and restricted assessment year 20
2021-22. The releva under:
“6.12 Howev during the appellant ha
'Peak Credit
6.13 As per of the asses manner tha
Aveo Ph
ITA Nos. 3009
CO No.

In this regard, the appellant has subm h book of appellant and bank stat n to establish the above facts.
r, with respect to the other vouchers, servations made by the A.O. as disc above. With respect to these vouch as failed to satisfactorily explain the iture and the documents submitted oes not corroborate with the cash vou te of transactions, party to whom pa unts recorded in vouchers and those ok or bank book of either appellant rnational Pvt. Ltd.
ingly, in view of above, out of total exp
87,006/-, [Rs. 9,00,000/- for AY 201
for AY 2020-21 and Rs. 59,41,500/
hold that the expenditure contained the extent of Rs.25,94,699/- stands e ect of balance expenditure of Rs.1,40,9
presents unexplained expenditure of a iod from F.Y. 2018-19 to F.Y. 2020-21
9-20 to A.Y. 2021-22.”
Ld. CIT(A) proceeded to apply d the addition to the extent o
019-20 and Rs.76,833/- in as nt finding of the Ld. CIT(A) is ver, in the submissions of the appella course of the appellate proceedi as raised an argument relating to appl
Theory' to the current case.
this theory, the unexplained credits an ssee has to be arranged in serial ord t a credit following a debit entry s harmaceuticals Pvt. Ltd
9
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
mitted the tement of , I concur cussed in hers, the source of d by the uchers in ayment is recorded t or M/s.
penditure
9-20, Rs.
/- for AY d in cash explained
92,307/-, appellant
1 relevant the peak credit of Rs.9 lakhs in ssessment year s reproduced as ant made ings, the lication of nd debits der in the hould be treated as re then only th expenses for receipts) sho
'Peak Credit credits and u order.
6.14 Furthe cases of Com
Fertilizer Tra has held as "14. mentio
Sampa edition
- One where the bo side b should follow refera not th should simple assess on ]«O
1990
shown be tha
198lha withdr plea i
(wheth provid show not h subseq
15. A where
Aveo Ph
ITA Nos. 3009
CO No.

eferable to the latter to the extent pos he 'peak' of the credits (i.e. the une r which there is no corresponding une ould be treated as unexplained. In othe t Theory' involves knocking off of une unexplained debits arranged in a chro er, the Hon'ble Allahabad High Cou mmissioner' of Income-tax (Central), K aders [2014] 42 taxmann.com 476 (Al under:-
Regarding the peak theory, it oned that the peak theory was defin ath Iyengar's Law of Income-tax, Vo n, page 3547. Accordingly, "Peak cred of the commonest defects of an a e a single credit or number of credits a ooks in the account of any particula by side with a number of debits is t d all be arranged in serial order, tha ing a debit entry should be tre ble to the latter to the extent possible he aggregate but only the "peak" of t d be treated as own explained. To e example, suppose there are credi see's book in the account. A or Rs. 5,
October, 1990 and again on 5th N but there is a debit by way of re n on 27th October, 1990, the explana at the credit appearing on 5th Nov as or could have come out rawal/repayment on 27th October, 19
is generally as it is logical and ac her the creditor is a genuine party ded there is nothing in the material on that a particular withdrawal/repaym have been available on the date quent credit.
refinement or extension of the ple e the credits appear not in the same harmaceuticals Pvt. Ltd
10
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
sible and explained explained er words, explained onological urt in the Kanpur v.
llahabad) may be ned in the Vol.-3, 9th dit theory"
assessee, appear in ar person that they t a credit eated as and that, the credit o, give a ts in the 000 each
November, epayment ation will vember, •
of the 981. This cceptable y or not), record to ment could e of the ea occurs e account but in if the and al are h assess a dete all the 6.15 An id
Allahabad H
Income-tax (C
67 taxmann.
6.16 Furthe
(2005) 276 IT the view of t confined to t be non-genu
6.17 Further
Developers V the it is the when the t related to bu
6.18 In th appellant h unexplained
Rs.1,40,92,3
transactions documents r unexplained action u/s 1
was incurre link with in appellant fo case is found
6.19 Further the appellan submitted a representing aggregating
Aveo Ph
ITA Nos. 3009
CO No.

the accounts of different persons. Ev genuineness of all the person is dis ll the credits appearing in the differen eld to be the assessee's own mon see will be entitled to set ermination of the peak credit after a e credits in the chronological order."
dentical view has also been taken
High Court in the case of Commiss
Central), Kanpur v. Sharraf Trading C
.com 176 (Allahabad).
r, in case of Bhaiyalal Shyam Beha
ITR 38 (AIl.), the Hon'ble High Court ha the tribunal that working of the peak s the credits and withdrawals which ar ine.
r, Hon'ble Surat ITAT in the case of Vs ACIT ITA Nos. 15/SRT/2021 has net profit net income which has to transactions of receipts and expen usiness of the assessee.
e current case, as discussed ab has both unexplained receipts as expenditure of Rs.1,31,15,474
307/- respectively which represe s of the appellant's business.
M representing unaccounted receipts as expenditure were requisitioned du
32A. Further, it is also noted that exp d for the purpose of business and h ncome earned. Therefore, the conte or application of 'Peak Credit' in the d to be acceptable.
r, during the course of appellate proc nt, vide its submission dated 03.01.2
working containing details of all the g unexplained receipts and exp to Rs.1,31,15,474/- and Rs. 1,40, harmaceuticals Pvt. Ltd
11
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
ven then, sbelieved nt account neys, the off and arranging n by the sioner of Co. [2016]
ari v CIT as upheld should be re held to f Poonam held that be taxed nses are bove, the well as 4/- and ents the Moreover, s well as uring the penditure has direct ention of e current ceedings,
2024 had vouchers penditure
,92,307/-

(refer para.
sequence of of the same
6.20 A detaile arranging all chronological
'Unexplained
(Rs.9,00,000/
F.Y, 2021-22) unexplained balance come
Aveo Ph
ITA Nos. 3009
CO No.

. 3.14) above arranged in chro f dates appearing on cash vouchers.
is being reproduced hereunder:
ed perusal of the above working reveals l the unexplained receipts and expen sequence and after inclusion of Introduction le aggregating to Rs.9
/- during F.Y. 2018-19 plus-i s.76,833
) whenever the unexplained receipts. Se expenditure, the total es to 'Nil'.
harmaceuticals Pvt. Ltd
12
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
onological
The copy that after nditure in entry of 9,76,833/-
3/- during ell short of closing

A.Y.

A.Y.

A.Y.

Accordingly, t u/s. 68 of unexplained e aggregating
Rs.9,76,833/
5. We have heard written submission record. We find tha vouchers were found search, the assesse entered all those cash
Aveo Ph
ITA Nos. 3009
CO No.

re, applying the above concept this 'Unexplained Introduction' aggreg
- actually represents the excess expenditure of Rs,l,40,92,307/- over and ined receipts of Rs.1,31,15,474/- which he actual net unexplained expenditure in during the period from F.Y. 2018-19 'to F o A.Y. 2019-20 to A.Y. 2021-22, re, after applying the concept of 'Peak C ase and relying on the various applicab the aggregate amount of net un of Rs.9,76,833/-shallbe taxed u/s. 69C essment ar
Amount of addition u/s.
69C6fthe Act
Y. 2019-20
Rs.9,00,000

Y. 2020-21
Rs. NIL

Y. 2021-22
Rs.76,833

the addition of Rs.1,31,15,474/- made b t^ie Act is being deleted and the ad expenditure made by the AO u/s. 69C to Rs.1,66,87,006/- is being rest
- in accordance with the table mentioned the arguments of the Ld. DR a and paper book of the assess at in the case, the documen d to be entered in the cash boo e has produced a cash flow h vouchers in the cash book. Th harmaceuticals Pvt. Ltd
13
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
of 'Peak gating to of total above the ultimately ncurred by F.Y. 2020-
Credit1 in ble judicial nexplained of the Act by the AO ddition of of the Act tricted to above.”
and perused the see available on nts of the cash ok and after the statement and he source of the cash expenditure has in the case of the ass applied and addition entered into the ca explained or co-relate
In the circumstances u/s 68 of the Act. Th cash flow statement disclosed source or u made u/d 68 of the remaining expenses h
Ld. CIT(A) though in unexplained and up deleted the addition the above action of accordingly, we rest
Assessing Officer for above.
5.1 The grounds of for statistical purpose
6. As far as ground concerned, the asses the proceedings u/s Aveo Ph
ITA Nos. 3009
CO No.

s been explained through cash b sessee, the theory of the peak c n for the entire cash vouchers ash book or source of which ed as either any sales or loans s, such cash receipts are liable he expenses which are explaine and source of which attribute undisclosed source addition for e Act, can only be treated as has to be held as unexplained e para 6.6 has treated the entire pheld the addition made by the in para 6.22 without any reaso f the Ld. CIT(A) cannot be tore the matter back to the r deciding afresh in the light o appeal of the Revenue are acco es.
ds raised by the assessee in cro ssee has raised grounds challen
153A of the Act. As no docum harmaceuticals Pvt. Ltd
14
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
book. Therefore, credit cannot be which were not has not been or other source.
e to be addition ed by way of the ed either to the which has been s explained and expenditure. The cash receipts as e AO. However, oning. In view of sustained and file of the Ld.
of our direction ordingly allowed oss-objection are nging validity of mentary evidence in support of ground these grounds are dis
7. Identical groun
2021-22 by the Reve finding in assessme appeal of the Revenu statistical purposes w by the assessee are d
8. In the result, assessment years ar cross-objection of th dismissed.
Order pronounced (KAVITHA RAJ
JUDICIAL M
Mumbai;
Dated: 26/03/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forwarded
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

Aveo Ph
ITA Nos. 3009
CO No.

ds raised have been filed before smissed as infructuous.
nds have been raised in the a enue and the assessee therefor ent year 2020-21, the grounds ue for assessment year 2021-22
whereas grounds raised in the dismissed.
the appeals of the Revenue re allowed for statistical purpos he assessee for both the assess in the open Court on 26/03/2025. /-
S
JAGOPAL)
(OM PRAK
MEMBER
ACCOUNTA d to :

BY ORDER

(Assistant Regi

ITAT, Mum harmaceuticals Pvt. Ltd
15
9 & 3008/MUM/2024 &
242 & 243/Mum/2024
us therefore, all assessment year re, following our s raised in the 2 are allowed for cross-objection e for both the ses whereas the sment years are KASH KANT)
ANT MEMBER
R, istrar) mbai