Krupashankar Gundanram Jaishwal,, Bilimora v. The Income tax Officer, Ward-2,, Navsari

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA.NO.3753/AHD/2004 ASSTT.YEAR : 2001-2002 MR.KRUPASHANKAR GUNDANRAM JAISHWAL (PRP.OF M/S.KRUPASHANKAR GUNDANRAM) ANAND BAZAR STATION ROAD BILIMORA. VS. ITO WARD-2 NAVSARI. ITA.NO.723/AHD/2007 ASSTT.YEAR : 2001-2002 ITO WARD-2 NAVSARI. VS. MR.KRUPASHANKAR GUNDANRAM JAISHWAL (PRP.OF M/S.KRUPASHANKAR GUNDANRAM) ANAND BAZAR STATION ROAD BILIMORA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TUSHAR HEMANI REVENUE BY : SHRI C.K.MISHRA O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST COMMON ORDER OF TH E CIT(A)-VI SURAT DATED 27-10-2004 FOR THE ABOVEMENTIONED ASSESSMENT YEARS. SINCE ISSUES RAISED IN THESE CROSS APPEALS ARE COMMON FOR THE SAKE OF CON VENIENCE WE DISPOSE OF BOTH THE APPEALS BY THIS CONSOLIDATED ORDER. 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E IN WHICH THE FOLLOWING GROUNDS ARE RAISED: I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS-VI) SURAT HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE INCOME ASSESSED BY THE ITO/WARD-2/NAVSARI AT RS.14 00 230/- AS AGAINST RET URNED INCOME OF RS.2 00 4O0/-. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS-VI) SURAT HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITI ON MADE BY ITA.NO.3753/AHD/2004 & 723/AHD/2007 -2- ITO/WARD-2/NAVSARI AND TAXING U/S.68 OF THE INCOME TAX ACT 1961 RS.4 99 828/- IN ISOLATION AS UNEXPLAINED CAS H CREDIT INTRODUCED ON 17/03/2001 AND WITHOUT GIVING SET OFF FOR THE CORRESPONDING DEBIT ENTRY OF RS.2 00 000/- ON THE S AME DAY. III) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS-VI) SURAT HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITI ON MADE BY ITO/WARD-2/NAVSARI AND TAXING U/S. 68 OF THE INCOME TAX ACT 1961 RS.7 00 000/- IN AGGREGATE IN ISOLATION AS UN EXPLAINED CASH CREDIT INTRODUCED ON 04/04/2000 13/04/2000 17/04/ 2000 AND 02/11/2000 WITHOUT GIVING SET OFF FOR THE CORRESPON DING DEBIT ENTRIES IN THE CASH BOOK AGGREGATING TO RS.7 00 000 /- PASSED ON SEVERAL DAYS FAILING IN THE CURRENT FINANCIAL YEAR. IV) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS-VI) SURAT HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ITO/WARD-2/NAVSARI IN TAXING THE AMOUNT OF RS.4 99 828/- AND RS.7 00 000/- AS DETAILED ABOVE INSTEAD OF THE AMOU NT OF ONLY THE PEAK CREDIT BALANCE' OF RS.2 99 828/- AS ON 17/03/ 2001 IN THE HANDS OF THE APPELLANT. V) WITHOUT PREJUDICE TO THE ABOVE THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS-VI) SURAT HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE IT0/WARD-2/NAVSARI IN TAXING THE AMOUNT OF RS.4 99 828/- AND RS.7 00 000/- AS DETAIL ED ABOVE INSTEAD OF WORKING OUT AND TAXING THE AMOUNT OF 'PE AK CASH DEFICIT' IGNORING (WITHOUT CONSIDERING) THE CREDIT AND DEBIT ENTRIES PASSED IN THE CASH BOOK. VI) WITHOUT PREJUDICE TO THE ABOVE THE ADDITION OF RS .4 99 828/- AND RS.7 00 000/- ON ACCOUNT OF UNEXPLAINED CREDIT ENTRIES IN THE DAY BOOK IS EXCESSIVE UNREASONABLE AND UNCALLED FO R; AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI HAS ALSO ERRED IN CONFIRMING THE ORDER. VII) THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE T O AND ARE INDEPENDENT OF EACH OTHER. FOR VARIOUS REASONS AND ON DIFFERENT GROUNDS THE O RDER CANNOT BE SUSTAINED. 3. IN THIS APPEAL BY THE ASSESSEE SEVERAL GROUNDS ARE RAISED. HOWEVER THEY ARE ALL AGAINST THE TOTAL ADDITION OF RS.11 99 828/- (RS.4 99 828/- PLUS ITA.NO.3753/AHD/2004 & 723/AHD/2007 -3- RS.7 00 000) MADE BY THE ASSESSING OFFICER (THE AO ) FOR UNEXPLAINED CASH CREDIT. AT THE TIME OF HEARING BEFORE US THE LEAR NED COUNSEL FOR THE ASSESSEE DID NOT SERIOUSLY CONTEND AGAINST THE ADDITION FOR CASH CREDIT IN PRINCIPLE. BUT HE REQUESTED THAT THE ONLY PEAK CREDIT SHOULD BE AD DED. HE FURTHER SUBMITTED THAT THE CIT(A) WHILE CONSIDERING THE PENALTY APPEA L OF THE ASSESSEE HAS WORKED THE PEAK CREDIT OF RS.4 99 828/- FOR WHICH H E HAS GIVEN THE DETAILED WORKING AT PAGE NO.3 OF HIS ORDER. HE THEREFORE S UBMITTED THAT THE ADDITION SHOULD ALSO BE LIMITED TO THE EXTENT OF PEAK CREDIT AMOUNTING TO RS.4 99 828/-. THE LEARNED DR ON THE OTHER HAND STATED THAT THE AS SESSEE HAS SHOWN THE CASH CREDIT OF RS.4 99 828/- IN THE NAME OF THE BANK WHI CH WAS FOUND TO BE FALSE. SIMILARLY THE ASSESSEE MADE CERTAIN DEPOSITS IN TH E BANK WHICH WAS NOT DEBITED IN THE BOOKS OF ACCOUNTS. THUS THERE WERE TOTAL C REDIT ENTRIES AMOUNTING TO RS.11 99 828/- AND THE ADDITION FOR THE ENTIRE AMOU NT SHOULD BE MADE AND NOT FOR THE ONLY SUM OF RS.4 99 828/-. HE ALSO SUBMITT ED THAT EVEN IF THE ARGUMENTS OF THE ASSESSEE FOR MAKING THE ADDITION OF PEAK CRE DIT IS ACCEPTED THE CIT(A) HAS WRONGLY WORKED THE PEAK CREDIT AT RS.4 99 828/- . THE ACTUAL PEAK CREDIT WOULD BE MUCH MORE. 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED MATERIAL PLACED BEFORE US. THE CIT(A) AT P AGE NO.4 PARA-4 OF HIS ORDER HAS GIVEN THE DATE WISE DETAILS OF DEBIT ENTR IES AND THE CREDIT ENTRIES AND THE PEAK WORKED OUT BY THE ASSESSEE. THE SAME IS R EPRODUCED BELOW: DATE CREDIT ENTRY DEBIT ENTRY PEAK CREDIT 04.04.2000 200 000 - 200 000 13.04.2000 200 000 - 200 000 17.04.2000 200 000 - 200 000 02.11.2000 100 000 - 100 000 23.02.2001 - 100 000 NIL 15.03.2001 - 200 000 NIL 17.03.2001 499 828 200 000 299 828 19.03.2001 - 200 000 NIL ITA.NO.3753/AHD/2004 & 723/AHD/2007 -4- 5. THERE IS NO DISPUTE WITH REGARD TO THE DATE WISE CREDIT AND DEBIT ENTRIES. THE DISPUTE IS WITH REGARD TO THE WORKING OF THE PE AK CREDIT. THE ASSESSEE HAD WORKED OUT THE PEAK CREDIT OF RS.2 99 828/- WHICH W AS NOT ACCEPTED BY THE CIT(A) IN THE APPEAL AGAINST THE ASSESSMENT ORDER. BUT IN THE APPEAL AGAINST THE PENALTY ORDER HE ACCEPTED THE PEAK CREDIT AT R S.4 99 828/-. HOWEVER ON THE BASIS OF THE ABOVE CHART IN OUR OPINION THE CO RRECT PEAK CREDIT WOULD BE WORKED OUT AT RS.7 00 000/- AS UNDER: DATE CREDIT ENTRY DEBIT ENTRY PEAK CREDIT 04.04.2000 200 000 - 200 000 13.04.2000 200 000 - 400 000 17.04.2000 200 000 - 600 000 02.11.2000 100 000 - 700 000 23.02.2001 - 100 000 600 000 15.03.2001 - 200 000 400 000 17.03.2001 499 828 200 000 699 828 19.03.2001 - 200 000 499828 THUS THE CORRECT PEAK CREDIT WORKS OUT TO RS.7 00 000/-. IN OUR OPINION WHEN THE ENTIRE CREDIT AND DEBIT IS TREATED AS BOGU S AND BELONGING TO THE ASSESSEE HIMSELF THE ADDITION FOR PEAK CREDIT ONLY CAN BE MADE AND NOT IN RESPECT OF EACH DEBIT AND CREDIT ENTRY. ACCORDINGL Y WE SUSTAIN THE ADDITION FOR THE PEAK CASH CREDIT AMOUNTING TO RS.7 00 000/- DUR ING THE YEAR UNDER CONSIDERATION. ITA NO.723/AHD/2007 6. GROUNDS RAISED IN THE APPEAL IS AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD.CIT(A) WAS JUSTIFIED IN LAW IN HOLDING THAT THE BENEFIT OF PEAK CASH CREDIT THEORY WOULD BE GIVEN TO THE ASSESSEE WHEN IN FACT THE LD.CIT(A) IGNORE THE FACT THAT THE ASSESSEE FAILED TO ESTABLI SH THAT CASH WAS INTRODUCED FROM THE CASH GENERATED OUT OF THE PREVI OUS ENTRY ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD.CIT(A) WAS JUSTIFIED IN LAW TO DIRECT THE AO WOR K OUT PENALTY OF PEAK CREDITS OF RS.4 99 898/-. ITA.NO.3753/AHD/2004 & 723/AHD/2007 -5- 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. SHORT FACTS OF THE CASE IS THAT THE AO HAS LEV IED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF ADDITION OF RS.1 1 99 828/- MADE BY HIM FOR UNEXPLAINED CASH CREDIT. THE CIT(A) IN PRINCIPLE U PHELD THE PENALTY. HE HELD THAT THE PENALTY SHOULD BE LEVIED ONLY ON THE PEAK CREDIT OF RS.4 99 898/-. WE HAVE ALREADY CONSIDERED THE ISSUE OF THE PEAK CREDI T WHILE DECIDING THE ASSESSEES APPEAL IN ITA 3753/AHD/2004 ABOVE. FOR THE DETAILED DISCUSSION IN PARA-4 AND 5 WE HAVE SUSTAINED THE ADDITION OF RS. 7 00 000/-. AGAINST THE ORDER OF THE CIT(A) SUSTAINING THE PENALTY ON PEAK CREDIT THE ASSESSEE IS NOT IN APPEAL. THEREFORE PENALTY IS TO BE LEVIED ON PEAK CREDIT DETERMINED BY US WHILE DECIDING QUANTUM APPEAL. IN VIEW OF THE ABOV E WE DIRECT THAT THE PENALTY UNDER SECTION 271(1)(C) WOULD BE LEVIED ON THE ADDITION OF RS.7 00 000/- SUSTAINED BY US ON ACCOUNT OF PEAK CR EDIT. THE AO IS DIRECTED TO WORK OUT THE PENALTY AT HUNDRED PER CENT OF THE TAX SOUGHT TO BE EVADED ON THE SUM OF RS.7 00 000/-. 8 . IN THE RESULT BOTH APPEALS OF THE ASSESSEE AND T HE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 9 TH APRIL 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 09-04-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) ITA.NO.3753/AHD/2004 & 723/AHD/2007 -6- 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD