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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
Principal Commissioner directed the AO to pass order afresh once again. This being the second round of litigation, the Commissioner ought to have examined the issues himself. According to the Ld. counsel, the AO examined the matter thoroughly and found that only the peak credit has to be taken as income of the assessee.
Therefore exercising the revisionary power for the second time, the Principal Commissioner cannot direct the AO once again to pass a fresh assessment. Referring to the assessment order, the Ld. counsel for the assessee submitted that the assessee engaged in the business of money lending for the last three decades. An amount of Rs.32,50,000/- was deposited on 09.07.2008 in the bank account and another sum of Rs.12,50,000/- was deposited on 16.03.2009. The assessee has withdrawn a sum of Rs.26,25,000/- The cash balance was available with the assessee for making this deposits.
4. The Ld. counsel for the assessee further submitted that the assessee is in the habit of withdrawing cash from the bank account for emergency requirements and redeposit the same whenever necessary. The assessee is adapting this technique to maintain his reputation in money lending and business. The withdrawal of Rs.7 lakhs made on 06.08.2008 and it was not used for any other purposes. Therefore it is available for redeposit in the bank account. The AO after examining the entire matter afresh based on the material available on record, as per the direction of the Principal Commissioner of Income Tax and found that the claim of the assessee to arrive at the peak credit can be accepted. Therefore, the second revision by the Principal Commissioner is not called for.
On the contrary Shri M.M. Bhusari, the Ld. Departmental Representative submitted that in the first round of revision proceeding, the Principal Commissioner directed the Ld.AO to redo the assessment de-nova, since the AO has not properly investigated the matter. The AO once again brought peak credit for taxation. Therefore the Principal Commissioner initiated revision proceedings for the second time. Referring to the impugned order of the Principal Commissioner of Income Tax, the Ld. DR submitted that the AO has not examined the issue properly as directed by the Principal Commissioner. The AO simply accepted the version of the assessee by placing reliance on the cash book prepared and furnished by the assessee on the basis of the bank statement. The assessee was having a bank account with Lakshmi Vilas Bank. The first account was closed on 03.10.2009 and the assessee has opened the second bank account on the very same day. The assessee has also opened a third bank account with Lakshmi Vilas Bank. During de-nova assessment proceedings, the AO has not examined the details of withdrawals and bank deposits. Since, proper enquiry was not done by the AO as directed in the revisional order, the Principal Commissioner for the second time found that there was an error in the order of the AO which is pre-judicial to the interest of the Revenue. Therefore the Principal Commissioner has rightly directed the AO to re-examine the matter once again.
We have considered the rival submissions on either side and perused the material available on record. Admittedly this is the second round of litigation before this Tribunal. In the first round of litigation, the AO specifically examined the cash deposits. Since the assessee could not explain the transaction property, the Ld.AO took the peak credit of Rs.50,76,005/- as unexplained cash investment.
In fact, the Ld.AO has observed as follows in the first assessment order:
“Unexplained investments: u/s.69 The assessee has been maintaining a Saving Bank a/c in Lakshmi Vilas Bank, J.N. Street, Pondicherry vide A/c No.0542301000025498. A total sum of ₹1,11,60,000/- deposited with the bank on various dates. On verification of the books of a/c maintained by the assessee, it is noticed that the above said investment was not recorded in the books of accounts. The cash deposits made in the bank account is outside the books of accounts maintained by the assessee. The assessee’s representative was asked to explain the cash deposits in the bank. The A.R., could not explain the transaction. However, he has requested for taking peak credit of the cash deposits as income. Hence, a peak credit of cash deposits on 09.01.09 was ₹50,76,005/- which happens to be highest positive balance of the assessee in the account. This peak credit of ₹50,76,005/- is treated as unexplained cash investment u/s 69 of the IT Act.”
This order of the Ld.AO was subject matter of revision before the Principal Commissioner. The Principal Commissioner in fact found that the Ld.AO completed the proceedings without proper enquiry and investigation on various aspects. The Principal Commissioner has also found that the case laws referred by the Ld.AO are not relevant and cannot be applied. In fact the Commissioner has observed as follows in the first round of litigation:- “6. The assessee has made contradictory claims in his written submission referred to above. His admission to the facts and the circumstances of the case itself justifies the observations made in the Show Cause Notice that the "that the A.O has not made any enquiries but has accepted the oral statements made by the Authorised Representatives of the assessee which are not supported by any evidences," When the assessee has been carrying on a business complying with various legal requirements, it becomes his statutory obligation to furnish all the details called for as per the provisions of the Income Tax Act, 1961 during any proceedings and he cannot be selective in furnishing the details and information. The assessee's versions that he is accepting the parking of funds by lot persons with him and out of which no benefit is derived by him and that unwritten understanding between him and the parties with whom he had transacted barred him from furnishing any further details regarding the cash transactions clearly go to show that the Assessing Officer has completed the proceedings without proper enquiry and investigation on various aspects. It is also found that the judicial case laws cited by him are not relevant and cannot be applied taking into account the facts and the circumstances of the present case.”
The assessee challenged this observation of the Princiapl Commissioner before this Tribunal in ITA No.1170/Mds/2014. This Tribunal by an order dated 06.11.2015 found that the Ld.AO was expected to make proper enquiry with regard to cash deposits. Since such an enquiry was not done, it was found that the Principal Commissioner has rightly invoked his revisional jurisdiction U/s.263 of the Act. Accordingly the first revisional order of the Principal Commissioner was confirmed by this Tribunal.
Consequent to the order of the Principal Commissioner as confirmed by this Tribunal, the Ld.AO examined the matter afresh.
The Ld.AO after examining the cash book, bank account and the documents impounded during survey operation found that out of three bank accounts with Lakshmi Vilas Bank, the first bank account was closed on 03.10.2009 and the second account was opened on the very same day after the closure of the first bank account. The third bank account was also opened subsequently. After examining the deposits, withdrawal, cash balance, documents impounded during survey operation, the Ld.AO found that peak credit can be accepted as income of the assessee.
Against this order of the Ld.AO, the Principal Commissioner again found that the Ld.AO has not made any proper enquiry as directed by the Principal Commissioner. The fact remains that the Ld.AO examined the matter afresh as directed by the Principal Commissioner in the first revisional order. It is not in dispute that the assessee engaged himself in the business of finance. In the de-nova proceedings before the Ld.AO, the assessee has filed all the details with regard to cash deposits, withdrawals and redeposit, etc., The Principal Commissioner after examining the matter afresh in light of the materials filed by the assessee including the documents impounded during the course of survey operation found that the peak credit can be taken as income of the assessee, since there are multiple withdrawals and redeposits. The question arises for consideration is when the Ld.AO for the second time examined the matter afresh as directed by the Principal Commissioner and found that there are withdrawals and deposits and only the peak credit can be taken as income, can the Principal Commissioner revise that order as erroneous and prejudicial to the interest of the Revenue. This Tribunal is of the considered opinion that the Ld.AO made proper enquiry in the second round of litigation. In the first round of litigation also, the Ld.AO has made enquiries and recorded his findings with regard to peak credit. Therefore exercising revisional jurisdiction for the second time U/s.263 of the Act is not called for. When the Ld.AO examined the matter as instructed by the Commissioner and found that only peak credit has to be taken, this Tribunal is of the considered opinion there are two views possible in the matter. The Ld.AO has taken one of the possible views. When the Ld.AO has taken one of the possible view after taking in to consideration the material available on record, the Principal Commissioner cannot say for the second time that the order of the Ld.AO is erroneous and prejudicial to the interest of the Revenue. When the assessee is engaged in the business of finance, it is required to keep sufficient cash balance in hand for meeting urgent business purposes. Whenever the assessee did not need money, the same was redeposited in the bank. This view of the Tribunal is fortified by the judgment of the Apex Court in Max India Ltd 295 ITR 282. Therefore the Principal Commissioner is not correct in distinguishing the judgment of the Apex Court in Max India Ltd (supra). In view of the above discussion, we are unable to uphold the order of the Principal Commissioner of Income Tax. Accordingly, the impugned revisional order is set aside and that of the AO is restored.
In the result, the appeal of the assessee stands allowed.
Order pronounced on 31st May, 2017 at Chennai.