The ITO, Ward-5(1),, Surat v. Shri Bipinchandra Nareshkumar Thakkar, Surat

ITA 1367/AHD/2011 | 2007-2008
Pronouncement Date: 11-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 136720514 RSA 2011
Assessee PAN AATPT7268C
Bench Ahmedabad
Appeal Number ITA 1367/AHD/2011
Duration Of Justice 6 month(s)
Appellant The ITO, Ward-5(1),, Surat
Respondent Shri Bipinchandra Nareshkumar Thakkar, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 11-11-2011
Date Of Final Hearing 04-11-2011
Next Hearing Date 04-11-2011
Assessment Year 2007-2008
Appeal Filed On 11-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI JM AND SHRI A. K. GARO DIA AM) ITA NO.1367/AHD/2011 A. Y.: 2007-08 THE INCOME TAX OFFICER WARD-5 (1) ROOM NO.313 AAYAKAR BHAVAN MAJURA GATE SURAT 395 001 VS SHRI BIPINCHANDRA NARESHKUMAR THAKKAR JAY JALARAM KAPAD STORES 4/5016 ZAMPA BAZAR SURAT PA NO. AATPT 7268 C (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI K. MADHUSUDAN SR. DR ASSESSEE BY SHRI K. N. BHATT AR DATE OF HEARING: 04-11-2011 DATE OF PRONOUNCEMENT: 11 -11-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-IV SURAT DATED 12-1-2011 FOR ASSESSMENT YEAR 2007-08 ON THE FOLLO WING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) SURAT HAS ERRED IN DELETING THE ADDITION OF RS.2 02 500/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) SURAT HAS ERRED IN RESTRICTING THE ADDITION TO PEAK AMOUNT OF RS.6 67 500/- INSTEAD OF RS.15 60 067/- MADE ON ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 2 ACCOUNT OF UNEXPLAINED DEPOSITED IN THE UNDISCLOSED BANK ACCOUNT. 3. THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT MOST OF THE AMOUNT WERE DEBITED TOWARDS CHEQUES PAYMENT AND NOT TOWARDS EACH WITHDRAWALS THROUGH SELF/BEARERS CHEQUES AS CLAIMED BY THE ASSESSEE. 4. THE LD. CIT(A) HAS FAILED TO APPRECIATED THAT ON US WAS ON ASSESSEE TO SUBSTANTIATE THAT CASH DEPOSIT WAS UTILIZED IN THE PURCHASE/SALE OF THE BUSINESS. NO EVIDENCE IN THIS REGARD WAS FURNISHED BEFORE THE A. O. NEITHER IT IS CLEAR FROM THE ORDER OF THE CIT (A) AS WHAT WAS THE END RESULT OF ALLEGED TRADING FOR WANT OF SUPPORTING EVIDENCE FOR EACH AND EVERY DEBIT/CREDIT ENTRY THE DEPOSITS/WITHDRAWALS REMAIN UNEXPLAINED. 5. THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY ACCEPTING THE ADDITIONAL EVIDENCES WITHOUT PROVIDIN G AN OPPORTUNITIES TO THE AO TO VERIFY THE SAME AS ENVISAGED UNDER RULE 46A (2) OF THE I. T. RULES 1962. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 7. IT IS THEREFORE PRAYED THAT THE ORDER OF THE L D. CIT(A)-IV SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE CHALLENGED THE FINDINGS OF THE AO BEFORE THE LEARNED CIT(A) H OLDING THE DEPOSIT OF RS.15 60 067/- AND CASH CREDIT OF RS.2 02 500/- AS UNEXPLAINED. ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 3 THE AO HAD INFORMATION ON THE BASIS OF A. I. R. THA T THE ASSESSEE HAD DEPOSITED CASH EXCEEDING THE PRESCRIBED LIMIT IN HI S ACCOUNT WITH IDBI BANK. THE EXISTENCE OF THIS ACCOUNT WAS NOT AC KNOWLEDGED BY THE ASSESSEE. FROM THE COPY OF THE BANK STATEMENT O BTAINED BY THE AO HE OBSERVED THAT CASH AMOUNTING TO RS.11 31 000 /- AND CLEARING CREDITS/CHEQUES INCLUDING INTEREST AGGREGATING TO R S.4 29 067/- WERE CREDITED TO THIS BANK ACCOUNT. THE SAID ACCOUNT WAS NOT REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN THE CREDIT ENTRIES AND DESTINATION OF WITHD RAWALS BUT NO EXPLANATION WAS SUBMITTED BEFORE THE AO DESPITE SEV ERAL OPPORTUNITIES. THE AO CONCLUDED THAT TOTAL OF THE C REDITS IN THE BANK ACCOUNT WERE UNEXPLAINED INVESTMENT FROM UNDISCLOSE D SOURCES AS THE BANK ACCOUNT WAS NOT DISCLOSED AND THE ASSESSEE HAS NOT ESTABLISHED THAT THE WITHDRAWALS HAD BEEN RE-DEPOSI TED. THE AO THEREFORE MADE ADDITION OF RS.15 60 067/-. 3.1 THE AO ALSO FOUND THAT THE ASSESSEE HAS SHOWN L OANS TOTALING TO RS.2 02 500/- IN THE NAMES OF (I) BIPIN CLOTH S TORES RS.1 50 000/- (II) DIMPLEBEN N. THAKKAR RS.15 000/- (III) MANISH ABEN B. THAKKAR RS.19 000/- AND (IV) SONALBEN KIRANKUMAR RS.18 500/ -. SINCE THE ASSESSEE DID NOT FURNISH ANY CONFIRMATION NOR ANY D ETAILS WERE SUBMITTED THE AO CONSIDERED THE SAME AS UNEXPLAINE D CASH CREDITS U/S 68 OF THE IT ACT AND MADE THE ADDITION ACCORDIN GLY. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESS EE HAD BECOME UNSOUND OF MIND AS HE HAD INCURRED HEAVY LOSSES HA D GONE MISSING AND HIS WHEREABOUTS WERE NOT KNOWN TO THE FAMILY ME MBERS. IT WAS ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 4 EXPLAINED THAT DUE TO THESE REASONS COMPLIANCE COUL D NOT BE MADE AT THE TIME OF ASSESSMENT. 3.2 AS REGARDS ADDITION OF RS.2 02 500/- IT WAS SU BMITTED BEFORE THE LEARNED CIT(A) THAT LOAN CREDITORS WERE ALL FAM ILY MEMBERS AND FRIENDS WHO HAD GIVEN TEMPORARY LOANS AND THAT THES E WERE OUTSTANDING FOR THE SAME AMOUNT IN THE PRECEDING YE ARS. THE ASSESSEE SUBMITTED BALANCE SHEET FOR THE PRECEDING ASSESSMENT YEARS 2005-06 AND 2006-07 TO SHOW THAT THE SAME CRE DITORS APPEAR FOR THE SAME AMOUNT IN THE BALANCE SHEET FOR THE P RECEDING TWO YEARS INCLUDING THE ASSESSMENT YEAR UNDER APPEAL. I T WAS THEREFORE ESTABLISHED THAT LOANS WERE NOT TAKEN IN THE CURREN T YEAR UNDER APPEAL. THE LEARNED CIT(A) ACCORDINGLY DELETED THE ADDITION OF RS.2 02 500/-. 4. ON CONSIDERATION OF THE FINDINGS OF THE LEARNED CIT(A) WE DO NOT FIND ANY MERIT IN GROUND NO.1 OF THE APPEAL OF THE REVENUE. THE BALANCE SHEETS OF EARLIER YEARS ARE PART OF THE REC ORD OF REVENUE DEPARTMENT. EVEN IF COPIES OF THE SAME WERE FILED B EFORE THE LEARNED CIT(A) WOULD NOT SHOW THAT THESE WERE FRESH EVIDENC E IN NATURE. SINCE THE BALANCE SHEETS OF THE EARLIER YEARS ARE A VAILABLE ON RECORD OF THE AO AND IT SHOWS THAT THE SAME AMOUNT OF CASH CREDIT APPEARING IN EARLIER YEARS WHICH IS CONTINUING IN T HE ASSESSMENT YEAR UNDER APPEAL WOULD PROVE THAT NO FRESH CASH CREDIT S HAVE BEEN RECEIVED IN THE ASSESSMENT YEAR UNDER APPEAL. THE L EARNED CIT(A) WAS THEREFORE JUSTIFIED IN DELETING THE ADDITIONS . NOTHING IS PRODUCED BEFORE US TO REBUT THE FINDINGS OF THE LEARNED CIT( A) IN THIS REGARD. ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 5 WE THEREFORE DO NOT FIND ANY MERIT IN GROUND NO.1 OF THE APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 5. AS REGARDS THE REMAINING GROUNDS NO.2 TO 7 OF TH E DEPARTMENTAL APPEAL WITH REGARD TO ADDITION OF RS. 15 60 067/- IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE BANK A CCOUNT WITH IDBI BANK WAS OF UNDISCLOSED ACCOUNT BUT THE ASSESSEE SU BMITTED THAT ADDITION ONLY OF PEAK CREDIT SHOULD BE CONSIDERED A S UNEXPLAINED INVESTMENT. IT WAS FURTHER SUBMITTED THAT THE CONTE NTION OF THE AO THAT CASH WITHDRAWAL HAD NOT BEEN RE-DEPOSITED IS NOT CO RRECT AS THE AMOUNTS HAVE BEEN WITHDRAWN FROM ATM AND BANK COUNT ER AND THESE HAVE BEEN DEPOSITED WITHIN SHORT PERIOD ON SA ME OCCASION ON THE SAME DAY. AS REGARDS CHEQUES DEPOSITS IT WAS M ENTIONED THAT THESE HAD BEEN MADE OUT OF PERSONAL LOANS TAKEN FRO M OTHER BANKS. IT WAS EXPLAINED THAT THE ASSESSEE HAD TAKEN SEVERAL P ERSONAL LOANS WHICH HE HAD USED TO SQUARE OFF PREVIOUSLY TAKEN LO ANS. WORKING OF THE PEAK CREDIT IN THE BANK ACCOUNT CONSIDERING ONL Y RE-DEPOSITS OF CASH WHICH WERE WITHDRAWN IN SELF NAME WAS SUBMITTE D ALONG WITH BANK STATEMENT OF THE CONCERNED ACCOUNT AND THE OTH ER LOAN ACCOUNT FROM WHICH CREDITS HAVE BEEN BROUGHT TO THE IMPUGNE D ACCOUNT. THE ASSESSEE WORKED OUT PEAK CREDIT OF UNDISCLOSED ACCO UNT IN A SUM OF RS.6 47 500/-. THE LEARNED CIT(A) ON GOING THROUGH THE UNDISCLOSED BANK ACCOUNT IN QUESTION SEEN THAT CASH HAS BEEN WI THDRAWN SEVERAL TIMES WITHIN THE DAY AND AT TIMES RE-DEPOSITED WITH IN SHORT PERIOD. THE LEARNED CIT(A) THEREFORE ACCEPTED THE PEAK TH EORY OF THE ASSESSEE. THE LEARNED CIT(A) FURTHER FOUND THAT THE SOURCES OF THE CREDIT ON ACCOUNT OF THE CHEQUES HAS BEEN ESTABLISH ED TO BE PERSONAL ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 6 LOANS AND THEREFORE HELD THAT THE SAME WOULD NOT BE UNEXPLAINED. THE LEARNED CIT(A) HOWEVER FOUND THAT THE MAXIMUM PEAK BALANCE WOULD BE RS.6 67 500/- AS AGAINST WORKING OF THE AS SESSEE AND ACCORDINGLY ADDITION WAS RESTRICTED TO RS.6 67 500/ - AS AGAINST THE ADDITION OF RS.15 60 067/-. 6. THE LEARNED DR BESIDES RELYING UPON THE GROUNDS OF APPEAL NO.2 TO 7 SUBMITTED THAT NO EXPLANATION WAS FILED B EFORE THE AO THEREFORE THE LEARNED CIT(A) VIOLATED RULE 46A OF THE IT RULES. HE HAS SUBMITTED THAT THE ASSESSEE NEVER OWNED UP THE BANK ACCOUNT WITH IDBI BANK AT THE ASSESSMENT STAGE. THEREFORE THEORY OF PEAK IS NOT ESTABLISHED IN THIS CASE. ON THE OTHER HAND T HE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE THE LEARNED CIT(A) AND SUBMITTED THAT ADDITION HAS BEEN RIGHTLY DELETED BY THE LEARNED CIT(A) PARTLY. HE HAS SUBMITTED THAT DUE TO THE REASONS EXPLAINED BEFORE THE LEARNED CIT(A) NO DETAILS COU LD BE FURNISHED BEFORE THE AO. THE LEARNED COUNSEL FOR THE ASSESSE E RELIED ON THE FOLLOWING ORDERS:- (1) SMT. URMILA RATILAL VS CIT (1982) 136 ITR 797 (GUJ.) (2) ITO VS MAHESHKUMAR JAYANTILAL VORA (2004) 3 SOT 96 (RAJKOT) (3) ASSTT. CIT VS TRITAN HAPPY HOME (P.) LTD. (200 5) 94 TTJ (CTK.) 628 (4) SANJAY KUMAR JAIN VS CIT (2001) 118 TAXMAN 821 (CAL.) (5) JAGADAMBA CONSTRUCTION CO. VS ITO (2004) 3 SOT 670 (JODH.) ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 7 (6) ARUN KALA VS ASSTT. CIT (2005) 98 TTJ (JP.) 10 46 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE FINDINGS OF THE AUTHORITIES BELOW. THE AO ON GO ING THROUGH THE A. I. R. INFORMATION FOUND THAT THE ASSESSEE HAS A BANK ACCOUNT WITH IDBI BANK. BUT THE ASSESSEE CLAIMED BEFORE THE AO T HAT HE HAS ONLY ONE BANK ACCOUNT WITH SURAT PEOPLE CO-OPERATIVE BAN K LTD. THUS THE ASSESSEE DENIED ANY BANK ACCOUNT MAINTAINED WIT H IDBI BANK. THE AO CALLED FOR THE BANK STATEMENT OF THE BANK AC COUNT OF THE ASSESSEE WITH IDBI BANK AND FOUND THAT THE ASSESSEE HAD MADE CASH DEPOSITS OF RS.11 31 000/- AND CHEQUES DEPOSIT WITH INTEREST OF RS.4 29 067/-. THE SAID BANK ACCOUNT WITH IDBI BANK WAS NOT REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. THE AO GAVE SPECIFIC SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN THE SO URCE OF THE DEPOSIT IN THE BANK ACCOUNT AND THE WITHDRAWALS ETC . BUT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE CREDIT S IN THIS BANK ACCOUNT. THE AO THEREFORE TREATED THE SAME AS UNE XPLAINED INVESTMENT U/S 69 OF THE IT ACT. 7.1 RULE 46A OF THE IT RULES PROVIDES THAT THE ASSE SSEE/APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE COMMISS IONER (APPEALS) ANY EVIDENCE WHETHER ORAL OR DOCUMENTARY OTHER TH AN THE EVIDENCES PRODUCED BY HIM DURING THE COURSE OF THE PROCEEDING S BEFORE THE ASSESSING OFFICER EXCEPT IN THE FOLLOWING CIRCUMSTA NCES NAMELY:- (A) WHERE THE AO HAS REFUSED TO ADMIT EVIDENCE WHIC H SHOULD HAVE BEEN ADMITTED ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 8 (B) OR WHERE THE ASSESSEE WAS PREVENTED BY SUFFICIE NT CAUSE FROM PRODUCING THE EVIDENCES WHICH HE WAS CALLED UP ON TO PRODUCED BY THE AO (C) WHERE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE AO THE EVIDENCE WHICH IS RELEVANT TO THE GROUNDS OF APPEAL AND (D) WHERE THE AO HAD MADE THE ORDER APPEALED AGAINS T WITHOUT GIVING SUFFICIENT OPPORTUNITIES TO THE ASSE SSEE TO ADDUCE EVIDENCE. IT IS ALSO PROVIDED THAT NO EVIDENCE SHALL BE ADMIT TED UNLESS THE COMMISSIONER (APPEALS) RECORDS IN WRITING THE REASO NS FOR ITS ADMISSION. IT FURTHER PROVIDES THAT COMMISSIONER (A PPEALS) SHALL NOT TAKE INTO ACCOUNT SUCH EVIDENCE PRODUCED UNLESS THE AO HAS BEEN ALLOWED REASONABLE OPPORTUNITY TO EXAMINE OR CROSS EXAMINE SUCH EVIDENCE OR WITNESSES PRODUCED BY THE ASSESSEE. 7.2 THE FACTS AND CIRCUMSTANCES NOTED ABOVE IN THE LIGHT OF THE FINDING OF THE AO WOULD CLEARLY PROVE THAT THE ASSE SSEE DID NOT PRODUCE ANY EVIDENCE OR EXPLANATION BEFORE THE AO A ND WHATEVER EXPLANATION OR EVIDENCE WAS PRODUCED BEFORE THE LEA RNED CIT(A) WAS NOT SUBJECTED TO EXAMINATION BY THE AO AND THE LEAR NED CIT(A) HAS ALSO NOT RECORDED IN THE IMPUGNED ORDER ANY REASONS FOR ADMISSION OF THE ADDITIONAL EVIDENCE. THE LEARNED CIT(A) HAS ALS O NOT RECORDED ANY SUFFICIENT CAUSE WHICH PROMPTED HIM TO GO THROU GH THE ADDITIONAL EVIDENCE AT THE APPELLATE STAGE IN VIOLATION OF RUL E 46A OF THE IT RULES. THUS THE LEARNED CIT(A) VIOLATED RULE 46A O F THE IT RULES WHILE CONSIDERING THE EVIDENCE PRODUCED BEFORE HIM AT THE APPELLATE STAGE. ALL THE CONDITIONS OF RULE 46A OF THE IT RU LES ARE NOT SATISFIED ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 9 BY THE ASSESSEE THEREFORE RELIANCE PLACED BY THE LEARNED CIT(A) ON ADDITIONAL EVIDENCES AT THE APPELLATE STAGE IS CLEA RLY UNJUSTIFIED. 7.3 FURTHER IT IS NOT IN DISPUTE THAT THE ASSESSEE MADE CASH DEPOSITS IN HIS ACCOUNT WITH IDIB BANK. SUCH BANK A CCOUNT WAS NOT REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE DENIED MAINTENANCE OF ANY SUCH BANK ACCOUNT WITH IDBI BANK BEFORE THE AO. THE ASSESSEE DID NOT EXPLAIN THE SOURCE OF THE DEPOSITS IN THE BANK ACCOUNT WITH IDBI BANK DESPITE OPPORTUNITIES P ROVIDED BY THE AO. THUS THE AO WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE MADE UNEXPLAINED INVESTMENT FROM THE UNDISCLOSED SOURCES . NO EVIDENCE OF WITHDRAWAL FROM THE SAME BANK ACCOUNT OR FOR RE- DEPOSIT WAS FILED. THUS THE ASSESSEE NEVER OWNED UP UNEXPLAINED INVES TMENT IN THE BANK ACCOUNT AT THE ASSESSMENT STAGE. BEFORE THE L EARNED CIT(A) THE ASSESSEE ACCEPTED THE UNDISCLOSED BANK ACCOUNT WITH IDBI BANK FOR THE FIRST TIME. THE THEORY OF WITHDRAWAL FROM A TM AND BANK COUNTER AND RE-DEPOSIT WITHIN SHORT PERIOD WAS NOT ESTABLISHED THROUGH ANY EVIDENCE OR MATERIAL ON RECORD. THE ASS ESSEE HAS NOT LAID OUT ANY FOUNDATION OF PEAK CREDIT BEFORE THE A O. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI VS CIT 276 ITR 38 HELD AS UNDER: IN ORDER TO ADJUDICATE UPON THE PLEA OF PEAK CREDIT THE FACTUAL FOUNDATION HAS TO BE LAID BY THE ASSESSEE. HE HAS TO OWN ALL CASH CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND ONLY THEREAFTER CAN THE QUESTION OF PEAK CREDIT BE RAISED. HELD THAT AS THE AMOUNT OF CASH CREDITS STOOD IN THE NAMES OF DIFFERENT PERSONS WHICH ALL ALONG THE ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 10 ASSESSEE HAD BEEN CLAIMING TO BE GENUINE DEPOSITS WITHDRAWALS/PAYMENTS TO DIFFERENT PERSONS DURING TH E PREVIOUS YEARS THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE BENEFIT OF PEAK CREDIT. 7.4 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS VIJAY AGRICULTURAL INDUSTRIES 294 ITR 610 HELD AS UNDER: THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1979-80 NOTICED CERTAIN CREDITS IN THE SQUARED UP ACCOUNTS OF THE ASSESSEE-FIRM AND TREATED THEM AS UNEXPLAINED DEPOSITS LIABLE TO BE TREATED AS INCOME FROM UNEXPLAINED SOURCES UNDER SECTION 68 OF THE INCOME-TAX ACT 1961. THIS WAS UPHELD BY THE APPELLATE ASSISTANT COMMISSIONER. ON FURTHER APPEAL CONTENDING THAT THE PEAK CREDITS SHOULD ALONE BE CONSIDERED FOR ADDITION UNDER SECTION 68 OF THE ACT AND NOT AS ADDED BY THE ASSESSING OFFICER AND CONFIRMED BY THE APPELLATE ASSISTANT COMMISSIONER THE TRIBUNAL HELD THAT ONLY THE AMOUNT OF PEAK CRED IT SHOULD BE DETERMINED BY THE ASSESSING OFFICER AND ADDED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 O F THE ACT. ON A REFERENCE: HELD THAT IN RESPECT OF THE SQUARED UP ACCOUNTS OF THE TWO DEPOSITORS THE ASSESSING OFFICER HIMSEL F HAD TAKEN THE PEAK CREDIT AS UNEXPLAINED DEPOSIT AN D ADDED IT UNDER SECTION 68 OF THE ACT. SO FAR AS THE REMAINING DEPOSITS WERE CONCERNED THERE WAS NO TRANSACTION BETWEEN THE DEPOSITORS AND THE ASSESSEE . THE PRINCIPLE OF PEAK CREDIT COULD NOT APPLY IN CAS E OF DIFFERENT DEPOSITORS WHERE THERE HAD BEEN NO TRANSACTION OF DEPOSITS AND REPAYMENT BETWEEN A PARTICULAR DEPOSITOR AND THE ASSESSEE. THE TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICE R TO TAKE THE PEAK CREDIT FOR THE PURPOSE OF SECTION 68 OF THE IT ACT. ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 11 7.5 THE LEARNED CIT(A) WITHOUT EXAMINING THE CONDUC T OF THE ASSESSEE THAT THE BANK ACCOUNT WITH IDBI BANK WAS D ENIED BEFORE THE AO ACCEPTED THE PEAK THEORY WITHOUT ANY JUST CA USE. SINCE THE THEORY OF THE PEAK WAS NOT SUPPORTED BY ANY EVIDENC E OR MATERIAL AND THE BANK ACCOUNT WITH IDBI BANK WAS DENIED BEFO RE THE AO THEREFORE THE LEARNED CIT(A) SHOULD NOT HAVE ACCEP TED THE EXPLANATION OF THE ASSESSEE FOR PEAK THEORY WITH RE GARD TO THE CASH DEPOSITS IN THE BANK ACCOUNT WITH IDBI BANK. THE HO NBLE SUPREME COURT IN THE CASES OF DURGA PRASAD MORE 82 ITR 540 AND SUMATI DAYAL 214 ITR 801 HELD THAT THE COURTS AND TRIBUNAL HAVE TO JUDGE THE EVIDENCES BEFORE THEM BY APPLYING THE TES T OF HUMAN PROBABILITIES AFTER CONSIDERING THE SURROUNDING CIR CUMSTANCES. THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN THE PRESENT CASE THE ASSESSEE HAS TAKEN CONTRARY STAND BEFORE THE AO AND THE LEAR NED CIT(A) BECAUSE BEFORE THE AO THE ASSESSEE DENIED TO HAVE M AINTAINED ANY BANK ACCOUNT WITH IDBI BANK BECAUSE IT WAS CLAIMED THAT THE ASSESSEE MAINTAINED ONLY ONE BANK ACCOUNT WITH SURA T PEOPLE CO- OPERATIVE BANK LTD. AND WHEN EXPLANATION WAS CALLED FOR BY THE AO THE ASSESSEE CHOOSE NOT TO REPLY TO THE SHOW CAUSE NOTICE HOWEVER BEFORE THE LEARNED CIT(A) THE ASSESSEE ACCEPTED THE UNDISCLOSED ACCOUNT WHEN HE WAS ALREADY CONFRONTED BY THE AO OF THE MATERIALS COLLECTED AGAINST HIM. THE LEARNED CIT(A) IN VIOLAT ION OF RULE 46A OF THE IT RULES ADMITTED THE PEAK THEORY OF THE ASSESS EE THEREFORE HE WAS NOT JUSTIFIED IN ACCEPTING THE THEORY OF PEAK C REDIT ON THE MATTER IN ISSUE. NO RELIANCE COULD BE PLACED ON THE EVIDEN CE FURNISHED BEFORE THE LEARNED CIT(A) IN VIOLATION OF RULE 46A OF THE IT RULES. ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 12 THUS IT STANDS ESTABLISHED THAT THE ASSESSEE FAILE D TO EXPLAIN UNDISCLOSED INVESTMENT IN THE IDBI BANK WHICH ARE N OT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALSO FAIL ED TO EXPLAIN THE SOURCES OF THE CASH DEPOSITS. THE LEARNED CIT(A) WA S THEREFORE NOT JUSTIFIED IN DELETING THE ADDITION. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION OF RS.1 1 31 000/- ON ACCOUNT OF CASH DEPOSITS IN BANK ACCOUNT. THE ORDER OF THE AO IS RESTORED TO THAT EXTENT. WE ACCORDINGLY CONFIRM ADD ITION OF RS.11 31 000/-. 8. AS REGARDS THE DEPOSIT OF RS.4 29 067/- ON ACCOU NT OF CHEQUES DEPOSIT/CLEARING CREDITS THE ASSESSEE EXPLAINED TH E SOURCE TO BE PERSONAL LOAN TAKEN FROM OTHER BANKS. THE ASSESSEE DID NOT FILE ANY EVIDENCE BEFORE THE AO IN THIS REGARD. THE LEARNED CIT(A) HAS NOT MENTIONED ANYTHING IN THE APPELLATE ORDER IF THE AS SESSEE MADE ANY REQUEST FOR ADMISSION OF THE ADDITIONAL EVIDENCE UN DER RULE 46A OF THE IT RULES. THE LEARNED CIT(A) DID NOT RECORD ANY REASONS FOR ENTERTAINING THE ADDITIONAL EVIDENCES. THE LEARNED CIT(A) DID NOT MENTION IF ANY SUCH CIRCUMSTANCES HAVE BEEN MADE FO R ADMISSION OF ANY ADDITIONAL EVIDENCES. RATHER IN PARA 2 OF THE APPELLATE ORDER THE LEARNED CIT(A) CONTRARILY NOTED THAT OPPORTUNITIES HAVE BEEN PROVIDED TO THE ASSESSEE AT THE ASSESSMENT STAGE. IT WOULD THEREFORE SHOW THAT PROPER OPPORTUNITIES HAVE BEEN GRANTED TO THE ASSESSEE AT THE ASSESSMENT STAGE AND THE ASSESSEE HAS FAILED TO MAK E OUT ANY CASE OF DENIAL OF OPPORTUNITY OR HAVING ANY SUFFICIENT C AUSE FOR FAILURE TO ADDUCE THE EVIDENCES BEFORE THE AO AT THE ASSESSMEN T STAGE. THE LEARNED CIT(A) THEREFORE WAS NOT JUSTIFIED IN ENT ERTAINING THE ITA NO.1367/AHD/2011 ITO W-5 (1) SURAT VS SHRI BIPINCHANDRA NARESHKUMA R THAKKAR 13 ADDITIONAL EVIDENCE AT THE APPELLATE STAGE IN VIOL ATION OF RULE 46A OF THE IT RULES. AS NOTED ABOVE THE LEARNED CIT(A) AL SO WRONGLY APPLIED THE THEORY OF PEAK CREDIT IN THE MATTER BEC AUSE THE AMOUNT DEBITED THROUGH CHEQUE PAYMENT WOULD NOT SPEAK OF P EAK THEORY. THEREFORE DELETION OF ADDITION ON THIS ISSUE IS AL SO HIGHLY UNJUSTIFIED. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LEARNED CIT(A) TO THAT EXTENT ALSO AND RESTORE THE ORDER OF THE AO. IN VIE W OF THE ABOVE DISCUSSIONS THE ADDITION DELETED BY THE LEARNED CI T(A) IS SET ASIDE AND THE ORDER OF THE AO IS RESTORED. GROUNDS NO.2 T O 7 OF THE APPEAL OF THE REVENUE ARE ACCORDINGLY ALLOWED. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD