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Income Tax Appellate Tribunal, KOLKATA BENCH (SMC
Before: Hon’ble Shri P.M. Jagtap]
order : October 13, 2017 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) Durgapur dated 28.10.2016 and the grounds raised
by the assessee therein read as under:
1. For that on the facts and circumstances of the case, the Ld. CIT (A) was not justified in confirming the addition of Rs. 5,42,428.31/-, 3,52,661.88/- and 4,55,950.24/- being the peak credit balance in the SB accounts of Smt. Mamata Dey, Smt. Moupiya Dey and Shri Somnath Dey respectively.
2. For that on the facts and in the circumstances of the case, the Ld. CIT (A) ought to have deleted the addition of Rs. 1,66,287/- made by the AO being the agricultural income of the appellant.
3. For that on the facts and in the circumstances of the case, the Ld. CIT (A) ought to have deleted the addition of Rs. 78,594/- made by the AO Sunil Baran Dey in respect of the alleged difference in the amount of purchases from M/s. Venkatrama Poultries Ltd.
4. For that on the facts and in the circumstances of the case, the Ld. CIT (A) ought to have deleted the entire addition of Rs. 1,02,620/- made by the AO in respect of the Fixed Deposits shown in appellant’s personal balance sheet.
2. At the outset, it is noted that there is a delay of 26 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, the assessee has filed an application seeking condonation of the said delay and keeping in view the reasons given therein, I am satisfied that there was a sufficient cause for the delay on the part of the assessee in filing this appeal before the Tribunal. Even the learned DR has not raised any objection in this regard. The said delay is therefore condoned and the appeal of the assessee is being disposed of on merit.
3. At the time of hearing before the Tribunal, the learned counsel for the assessee has not pressed ground no 2 and 4 raised by the assessee in this appeal. The same are accordingly dismissed as not pressed.
4. Apropos the issue involved in ground no 1, the relevant facts of the case are as follows. The assessee is an individual who is engaged in the business of wholesale trading of eggs. The return of income for the year under consideration was filed by him on 20.03.2012 declaring a total income of Rs. 3,08,227/-. During the course of assessment proceedings, it was found by the AO that there were 3 bank accounts maintained with Axis Bank in the name of Mamata Dey, Sunil Baran Dey wife of the assessee, Moupiya Dey, daughter of the assessee and Somnath Dey, son of the assessee. The said bank accounts were also found to be utilised by the assessee and even the concerned account holders admitted this position. Since the said bank accounts were not disclosed by the assessee in his books of account, he was called upon by the AO to explain the deposits made in the said accounts. Although the assessee explained that the transactions reflected in the said bank accounts were pertaining to his business, the same was not accepted by the AO in the absence of any evidence to support and substantiate the same. He accordingly treated the peak credit balance in the said 3 bank accounts amounting to Rs. 5,42,428/-, Rs. 3,52,661/- and 4,55,950/- as the undisclosed income of the assessee and added the same to his total income in the assessment completed under section 143(3) vide an order dated 28.03.2013. On appeal, the Ld. CIT (A) confirmed the said addition made by the AO.
I have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has contended that all the transactions reflected in the 3 bank accounts in question maintained in the names of the family members of the assessee were related to his business and therefore only the profit element involved in the credits appearing in the said bank accounts can be added to the total income of the assessee. I find it difficult to accept this contention of the learned counsel for the assessee in the absence of any cogent evidence to support and substantiate the same. He has also raised an alternative argument that the combined peak credit balance of all the 3 bank accounts in question only can be added to the total income of the assessee and not Sunil Baran Dey the total of peak credit balances appearing in the individual accounts. In support of this contention, he has relied on the decision of this Tribunal in the case of ITO vs Uday Shankar Mahawar rendered vide an order dated 16.07.2010 passed in ITA no 1903/Kol/2009. A copy of the said order is also placed by him on record and perusal of the same shows that a similar issue was decided by the Tribunal in the said case vide paragraph no 5 which reads as under: “We have heard the rival submissions and perused the material available on record. We find that the Ld. CIT (A) while partly allowing the assessee’s appeal held that the addition made by the AO on account of deposits in undisclosed bank accounts is directed to be restricted to the combined peak credit of Rs. 22,80,206.63 has observed as under: “4.6 I have perused the assessment under and the remand report. I have also considered the submission of the appellant and heard the Ld. AR. I have considered the rival submissions in so far as the applicability of section 69A in the case of the appellant is concerned. The fact of the matter is that the appellant has maintained two bank accounts which are admittedly not disclosed in the income tax return. There is no doubt that the deposits in the undisclosed bank accounts represent undisclosed income of the appellant, which shall be discussed, in detail, in the subsequent paragraphs. I find no legal infirmity in the order of the AO. It is an admitted fact that the two bank accounts maintained by the appellant with the HDFC are not disclosed in the income tax return. During the course of assessment proceedings, the appellant could offer no satisfactory explanation as regards the nature and source of the deposits in the bank accounts. The AO therefore added the entire deposits in both the bank accounts as income from undisclosed sources. The addition was made by the AO primarily because the appellant could offer no explanation before him. As the language used by the AO in the assessment order suggests, since the appellant failed to discharge his onus in explaining the source of credits appearing in the bank accounts, the AO simply ‘presumed’ that all credits represented undisclosed income of the appellant. It was basically the absence of any explanation from the appellant that prompted the AO to add all the credits as undisclosed income.
Sunil Baran Dey However, during the course of remand proceedings, the submissions of the appellant were duly considered by the AO. The AO has fairly admitted that applying the peak credit method could be the correct way to determine the undisclosed income. But, the AO has suggested that peak credits for both the accounts should be worked out separately and their aggregate should be taken as the undisclosed income. I find no justification in the objection raised by the AO against the amalgamation of the two bank accounts. The amalgamation of all the deposits and withdrawals in respect of all undisclosed bank accounts is an integral part of the peak credit theory. For, any withdrawal made from an undisclosed bank account is available with the appellant for subsequent deposits in the same bank account or in other undisclosed bank accounts. And therefore, for any withdrawal made from any undisclosed bank accounts, corresponding credit has to be allowed against subsequent deposits made in the same bank account or in other undisclosed bank accounts. Even the AO has admitted, in his remand report, that there are transactions inter-linking the two bank accounts. These inter-linking transactions relate to fund transfers. I agree with the Ld. AR that, in case of inter-linking transactions by way of cash, there can naturally be no evidence. I find substance in the contention of the appellant that once the peak credit method is accepted, then the combined peak credit worked out on the basis of amalgamated deposits and withdrawals of all the undisclosed bank accounts is the only correct method for determining the undisclosed income. I have considered the bank accounts and found that there are various credits as well as withdrawals in the bank accounts. It is an admitted fact that the bank accounts are undisclosed and therefore the deposits in the bank accounts are unexplained investment of the appellant. But, the amount invested at one point of time was withdrawn subsequently and was therefore, available for further deposits. There is no material on record to show that the amount withdrawn has been utilized by the appellant for any expenses or for any investment. And therefore, the peak credit of Rs. 22,80,206.63 would cover the total deposits and withdrawals in the bank accounts. The decision of the AO to add the aggregate deposits in the bank accounts, without giving benefit of withdrawals made from time to time is not justified. 4.7 I have carefully considered the various legal pronouncements relied upon by the appellant. They also support the contention of the appellant that only the combined peak credit of the undisclosed bank accounts should be considered as undisclosed income. For, in the case of ACIT vs Sunil Baran Dey Loknath Prasad Gupta [IT (SS) A No. 185 & 190/Kol/2003], the Hon’ble ITAT, ‘C’ Bench, Kolkata upheld the peak credit method. In this case, the AO added all the credits appearing in an undisclosed bank account, aggregating to Rs. 27,49,858/-. The Ld. CIT (A) restricted the addition to the peak credit of Rs. 7,50,975/-. Upholding the decision of the Ld. CIT (A), the Hon’ble ITAT held as under: ‘We have carefully perused the respective bank accounts and observed that there were various credits as well as withdrawals in the said bank account beginning on and from 01.01.1990 to 20.03.2002, leaving a closing balance of Rs. 8,461/-. There is no doubt that the deposit in the bank account is an unexplained investment by the assessee. However, it is seen that every deposit is followed by a withdrawal subsequently. The amount invested at one point of time has been withdrawn subsequently and there was a further deposit in the bank account. Therefore, the peak credit of Rs. 7,50,975/- covers the total deposit and withdrawal made by the assessee in the said bank account. Making the addition of aggregate deposits in the bank account without giving the benefit of withdrawals made by the assessee from time to time is not justified. The Ld. CIT (A) has rightly treated the peak balance of Rs. 7,50,975/- as an unexplained investment made by the assessee in the nature of credits in the said bank account and therefore, the addition of Rs. 7,50,975/- is only called for. The order of the Ld. CIT (A) is therefore, upheld’. In the case of ACIT vs Praveen Kumar Agarwal [IT (SS) A No. 61 & 74/Kol/2003], the Hon’ble ITAT, ‘C’ Bench, Kolkata upheld the combined peak credit method. In this case, the appellant maintained various undisclosed bank accounts. The AO added the entire deposits amounting to Rs. 23,55,26,844/-. The Ld. CIT (A) confirmed the addition only to the extent of the combined peak credit of Rs. 23,92,582/-. The Hon’ble ITAT upheld the decision of the Ld. CIT (A) and observed as under: The Ld. CIT (A) has thereafter observed that since there are debits and credits in the above seized material and since these are regular debits and credits in the accounts and no material has been found to show that the debit/withdrawals have been used for any investment or any expenditure by the assessee, it means that the money withdrawn was being regularly being routed back into accounts through the medium of companies and in these circumstances there is well established system of taxing only the peak credit. He has, therefore, asked the AO to examine Sunil Baran Dey the working of peak credit by the assessee, which has been confirmed by the AO vide letter dated 25.02.2003 and the Ld. CIT (A) has thereafter confirmed the addition to the extent of peak credit amounting to Rs. 23,92,582/- against the addition of Rs. 23,55,26,844/-. In his rival submissions, the Ld. Counsel for the assessee has submitted that from the perusal of seized documents. It was absolutely apparent that the assessee was involved in providing accommodation entries to different beneficiaries and nothings contained in the seized register were nothing but the receipt of cash and deposit of cheques and other related entries to enable him to work as an entry operator. The Ld. Counsel has pointed out that the ld. CIT (A) has given a specific observation after perusing the relevant seized material tht entries contained in such seized material were nothing but entries made by the assessee for carrying out his activity as an entry operator and for this purposes only taxing of peak credit could have been the best option which has also been done by the Ld. CIT (A). In support of his contention, he tans relied on the decision of ITAT Kolkata in IT (SS) A. No. 190/Kol/2003 dated 11.10.2004 in the case of ACIT vs Lpknath Gupta, wherein this Tribunal has held that in case every deposit is followed by a withdrawal then the peak credit only covers the total deposit and withdrawal made by the assessee and the same can be treated as unexplained investment by the assessee’. 4.8 In view of the above and the various pronouncements and also the ration laid down by the Hon’ble ITAT, Kolkata the addition made by the AO on account of deposits in undisclosed bank accounts is directed to be restricted to the combined peak credit of Rs. 22,80,206.63. Ground no 2 is partly allowed. In this view of the matter, and in the absence of any controverting material brought on record by the revenue at the time of hearing before us, we do not find any infirmity in the order of the Ld. CIT (A) and the same is hereby upheld. Therefore, the appeal of the revenue is dismissed.”
Respectfully following the decision of the Co-ordinate Bench of this Tribunal in the case of Uday Shankar Mahawar (supra), I accept the alternative contention of the learned counsel for the assessee and Sunil Baran Dey direct the AO to restrict the addition on this issue to the extent of combined peak credit balance of all the 3 bank accounts in question. The working of such combined peak credit has been prepared and furnished by the assessee at page no 51 of his paper book showing the combined peak credit balance at Rs. 5,44,775/-. The AO is directed to verify the said working and allow appropriate relief to the assessee on this issue. Ground no 1 of the assessee’s appeal is thus partly allowed.
As regards the issue involved in ground no 3 relating to the addition of Rs. 78,594/ made by the AO and confirmed by the Ld. CIT (A) on account of difference in the amount of purchases made by the assessee from M/s. Venkatrama Poultries Ltd., it is observed that the purchases made by the assessee from M/s. Venkatrama Poultries Ltd. during the year under consideration were shown at Rs. 16291174/-. The enquiry conducted by the AO with the said party however revealed that the purchases made by the assessee were to the tune of Rs. 1,62,12,058/-. There was thus a difference of Rs. 78,594/- and since the assessee could not reconcile or explain the same, an addition of Rs. 78,594/- was made by the AO to the total income of the assessee. On appeal, the Ld. CIT (A) confirmed the said addition.
I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although the learned counsel for the assessee has contended that no opportunity was given by the AO to the assessee to cross-examine M/s. Venkatram Poultry Ltd. before making the impugned addition on the basis of information collected from them, I find that the said information was Sunil Baran Dey confronted by the AO to the assessee pointing out the difference in the amount of purchases and an opportunity was also given to the assesses to explain/reconcile the same. The assessee however failed to explain/reconcile the said difference and this failure continued even during the course of appellate proceedings before the Ld. CIT (A) where the assessee got another opportunity to reconcile/explain the difference in the amount of purchases specifically pointed out by the AO. I, therefore, find merit in the contention of the learned DR that the assessee has already been given proper and sufficient opportunity of being heard on this issue and there is no case to give one more opportunity as sought by the learned counsel for the assessee. I, therefore, find no merit in ground no 3 raisesd by the assessee and dismiss the same.
In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 13th October, 2017. Sd/- (P.M. Jagtap) ACCOUNTANT MEMBER Dated: 13/10/2017 Biswajit, Sr. PS Copy of order forwarded to:
1. 1. Shri Sunil Baran Dey, Kamalpur, Bankura – 722136. 2. ITO, Ward (1), Bankura. 3. The CIT(A)