REJI T SAMUEL,MUMBAI vs. ITO 20(2)(4), MUMBAI

The Ld CIT (A) has erred in law and in facts in confirming the additions made by the AO on account of alleged unexplained investment in immovable properties to the tune of Rs. 33,24,820/- as well as deposits made in bank accounts to the tune of Rs. 61,83,558/-.

The Ld CIT (A) has erred in law and in facts in confirming the disallowance of expenses of Rs. 47,000/- claimed as deduction by the appellant while computing his income.

The order passed by the Ld CIT (A) is in violation of principles of natural justice and is passed without giving a proper opportunity of hearing to the appellant.” Briefly stated relevant facts of the case are that the assessee is engaged in 2. the business of „retailing of tyre‟. Assessee field the return of income declaring the total income of Rs. 4,19,270/-. Assessment was completed u/s 143(3) of the Act determining the total income at Rs. 1,00,74,643/-. In the assessment, AO made

During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) confirmed the addition of Rs. 95.08,378/- and upheld the decision of the AO. Again aggrieved with the said decision of the CIT (A), assessee is in further appeal before us by raising the above mentioned grounds.

During the proceedings before us, Ld Counsel for the assessee filed consolidated details of bank transactions of the assessee for the period from 1.4.2008 to 31.3.2009, taking into account all the bank accounts maintained by the assessee during the year. As per the Ld Counsel for the assessee, only the peak credit should have been considered on merits for making additions, if any, by the AO and not the total of all the deposits made by the assessee in its bank accounts. Further, Ld Counsel for the assessee filed an additional ground and the same reads as under:- “The Ld CIT (A) ought to have directed the Assessing Officer to take into account only peak balance after adjusting income disclosed in the return of income as against the total amount deposited in the bank accounts considered by him while determining total income of the appellant.” He further submitted that if the said peak credit is considered in favour of the 5. assessee in principle, the related issues can be considered by the AO in remanding proceedings. In such case, assessee will not press the legal ground about the invalidity of the assessment made u/s 143(3) of the Act as mentioned by him in Ground no.1 of the original grounds of appeal.

In response to the above submissions, Ld CIT-DR for the Revenue mentioned that the said peak credit is given for the first time before the Tribunal and this working requires to be remanded to the file of the AO for verification on the correctness of the same.

Today, ie 17.3.2016, on the date of hearing, Ld Counsel for the assessee submitted that Ld DR filed a remand report dated 16.3.2016 and submitted the following:-

In response to the above, Ld Counsel for the assessee rebutted by stating that gross peak balance as on 30.9.2008 is Rs. 13,62,439/- before setting off against the income returned. However, regarding the differences, Ld AR mentioned that he does not want to litigate on this discrepancy so as to end the litigation on the subject.

We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. After hearing both the parties, we are of the opinion, the legal issue raised by the assessee vide Ground no.1 regarding the invalidity of the assessment order should be dismissed as not pressed. We order accordingly.

Regarding Ground No.2 read with additional ground relating to the peak credit addition, we find, AO cannot be allowed to make gross deposits of 95,08,378/- as addition under the factual matrix as discussed above. The AO can only make peak credit addition which is a settled proposition in the matter. After analyzing the peak credit working of the assessee as well as the Revenue, the net peak credits are Rs. 12,61,639/- and Rs. 10,90,343/- respectively. These figures are arrived at after the prorata income earned upto September, 2009 are adjusted. Regarding the prorata income, there is no dispute and the income agreed by both the parties is Rs. 2,72,097/-. Thus, there is a difference of Rs. 1,71,296/- (ie Rs. 12,61,639 – Rs. 10,90,343) in the net peak credit balances of the assessee and the Revenue. The Revenue is of the opinion that certain expenses such as payments to labour;

Regarding Ground no.3, we find the facts include that in the return of income, assessee declared Rs. 1,64,496/- under the head „income from other sources‟ and claimed expenses of Rs. 47,000/- against the said income. In the assessment, AO did not allow the said set-off of Rs. 47,000/- in view of the assessee‟s failure to substantiate that the said expenses are incurred for earning of the above income. On appeal, CIT (A) confirmed the same. Even before us, no evidence was advances to establish the nexus between the income from other sources. Considering the same, we find the decision of the CIT (A) on this issue given in para 5.4 of his order is fair and reasonable and it does not call for any interference. Accordingly, Ground no.3 raised by the assessee is dismissed.

Ground no.4 raised by the assessee is general in nature. Considering the general nature, the Ground no.4 is dismissed as general.

In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 17th March, 2016. (RAM LAL NEGI) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 17.3.2016 व.नन.स./ OKK , Sr. PS आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. 5 प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- 3. 4. आमकय आमुक्त / CIT 5. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 6. गार्ड पाईर / Guard file. सत्मावऩत प्रनत ////