DCIT/ACIT, CIRCLE - 2(1), JALPAIGURI, JALPAIGURI vs. SHRI ABHISHEK GHOSH, ALIPURDUAR

The Ld. CIT(Appeals), Jalpaiguri has failed to appreciate the additions made by the AO to the tune of Rs. 1,75,63,078/-, based on the Peak Credit Theory on 02 undisclosed bank accounts, for failing to disclose the bank accounts in the ITR. 3. The Ld. CIT(A), Jalpaiguri has completely ignored the addition on ground of uncorroborated payments to the tune of Rs. 3,00,000/- and did not make any mention of the same in the appellate order while giving relief to the assessee. CO No. 47/Kol/19 Shri Abhishek Ghosh

The Ld. CIT(A), Jalpaiguri has gone beyond the Assessment Order passed u/s 143(3) of the I.T. Act, 1961 and deleted the entire additions made by the AO and came up with new addition of Rs. 45,00,000/- being the closing balance of the undisclosed bank accounts.

Grounds of appeal

The ld. AR submitted that the deposits made in these two undisclosed bank accounts (UBK Gramin Bank & C.B.I Alipurduar) were made out of cash withdrawals CO No. 47/Kol/19 Shri Abhishek Ghosh from his disclosed current bank account to the saving bank accounts of his undisclosed two bank accounts of CBI & UBI Gramin Bank for the purpose of earning interest and also to show net worth for the purpose of availing higher credit/loan. Explaining further, the ld. AR submitted that the main purpose for making such transfer from current account with the Central Bank of India (C.B.I) to saving undisclosed bank account in the same branch was nothing, but for the reason that since money in the current account does not yield any interest income, so deposits of money was transferred to saving bank account (undisclosed ) so that interest could be earned even for a very short term fixed deposits. Thus, according to ld.AR, the assessee transferred his own money in his disclosed account in SBI & CBI account to the undisclosed bank account and in that process the assessee has earned bank interest of Rs. 2,21,000/- from the undisclosed saving bank accounts. It was further pointed out that there was no transfer from disclosed saving bank account to another (undisclosed) saving bank account, but all the deposits were made to undisclosed two saving bank account came from the current account maintained with C.B.I only or through encashment or very short term deposits. Taking these facts into account, the ld. CIT(A) has given partial relief to the assessee by restricting the addition to Rs. 47.21 lakhs ( i.e. closing balance of Rs. 35 lakhs from CBI & Rs. 10 lakhs from U.B.K Gramin Bank & Rs. 2,21,000/- interest earned) which action of the ld. CIT(A) has been challenged by the Revenue by preferring this appeal and according to ld.AR, the ld. CIT(A) has rightly given to relief finding merit in the contention of the assessee and he does not want us to interfere. According to ld. AR, he has preferred cross objection, wherein he challenged that portion of the impugned order wherein the ld. CIT(A) has confirmed the addition to the tune of Rs. 45 lakhs ( not the addition confirmed on the interest earned of Rs.2,21,000/-). According to the ld.AR, the AO has made the addition(s) due to failure on the part of the assessee to justify the transactions, which happened in the two undisclosed bank accounts and the ld. CIT(A) though appreciated the fact that the assessee had only transferred the amounts in his disclosed bank account i.e current account to the undisclosed saving bank account to earn the interest income, however, has erroneously added the balance amount found on 31.3.2014 in both the undisclosed bank accounts which needs detailed verification to show that the balance in these accounts are infact sourced from CO No. 47/Kol/19 Shri Abhishek Ghosh the disclosed bank account of the assessee, so no addition could have been sustained. So he prays that the confirmed addition/issue may be remanded back to AO for verification and for denovo adjudication. Per contra, the ld DR, vehemently supports the action of ld CIT(A) confirming addition of Rs 47.21 lakhs and does not want us to interfere. The ld DR vehemently assailing the action of ld CIT(A) giving relief to the assessee, want us to interfere and reverse the order.

We note that the AO has made additions due to failure of assessee to justify the transaction, which happened in two undisclosed bank accounts of the assessee. Since the main contention of the assessee is that these bank accounts ( undisclosed) are nothing but bank accounts maintained by the assessee for the purpose of earning interest and for the purpose of showing high net worth for availing higher credit/loan, which fact has been found to be true by the ld. CIT(A), who has even placed in his impugned order, the reconciliation chart of all the 2 disclosed bank accounts transaction and the other 2 undisclosed bank accounts of all the bank account in a chart form to demonstrate the cash trail from assessee’s disclosed bank account to the undisclosed savings bank accounts of the assessee, which chart is seen placed by the ld. CIT(A) from page-7 to 10 of his impugned order; and his finding of fact that the explanation of assessee that money is transferred from his disclosed bank account to the S.B account of undisclosed bank account was only for earning interest is true, which finding of fact of Ld CIT(A) has not been challenged by Revenue as a specific ground before us, and so the result is that this finding of ld. CIT(A) that assessee’s disclosed money was being transferred to undisclosed bank account which fact the assessee is able to convince/satisfy the ld. CIT(A) and which factual finding before us has crystalized and cannot be disturbed. Thus the ld CIT(A) has the found that the amount in the undisclosed bank account the assessee has been able to establish one to one trail and therefore the amount which has been transferred from his disclosed bank account to the un-disclosed bank account cannot be termed as ‘income’ of the assessee and the ld. CIT(A) has correctly deleted the additions and has given partial relief to the assessee. And moreover, since the revenue failed to challenge the ld. CIT(A)’s finding that assessee’s transaction of money in his undisclosed bank account does not emanate from any other business activity other than the contractor activity by which the assessee’s contract receipts were transferred from his disclosed bank account CO No. 47/Kol/19 Shri Abhishek Ghosh (current) to the undisclosed bank account, the same money is under circulating and so, separate G.P addition from the undisclosed bank account added by AO was rightly deleted and this finding fact of ld. CIT(A) that the money found in the undisclosed bank accounts are not from any other business activity of the assessee has also crystalized and so the ld. CIT(A) rightly deleted the G.P addition. In the aforesaid backdrop the “Peak credit” theory invoked by the AO is erroneous, since the money in the undisclosed bank accounts of assessee are from his own disclosed bank account as found as a finding of fact by the ld. CIT(A) since not challenged by the Revenue has also crystalized, so the ld. CIT(A) rightly deleted the addition made by AO on this score also and So the Revenue’s appeal lacks merits and deserves to be rejected, so we dismiss the revenue’s appeal for the reasons stated above.

Coming to assessee’s cross objection, we note that the ld. CIT(A) even though found that the money in the undisclosed bank accounts are sourced from the disclosed bank accounts and though has recorded a finding that assessee was not into any other business other than his contractual work, he confirmed the balance amount found in the two undisclosed bank accounts as on 31.3.2014, which action of ld. CIT(A) needs detailed verification and for that we set aside the impugned order of the ld. CIT(A) and remand the same back to the file of the AO for examination /verification as to whether the source of balance amount found in the two un-disclosed bank account as on 31.3.2014 are from the disclosed bank account of the assessee. If the assessee is able to prove so, then no addition to be made or else to make addition in accordance to law after affording reasonable opportunity of being heard to the assessee. The assessee is also directed to appear before the A.O and to participate in the proceeding diligently.

In the result, the appeal of revenue is dismissed and CO of the assessee is allowed for statistical purposes.

DR, Kolkata Benches, Kolkata **PP/SPS True Copy By By Order Assistant Registrar ITAT Kolkata