Income Tax Appellate Tribunal - Raipur
The Assistant Commissioner Of Income ... vs Shri Vijay Kumar Mishra & Co, Bhilai(Cg) on 22 April, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
RAIPUR BENCH, RAIPUR
BEFORE SHRI SHAMIM YAHYA, HON'BLE ACCOUNTANT MEMBER &
SHRI PARTHA SARATHI CHAUDHURY, HON'BLE JUDICIAL MEMBER
ITA No. 177/RPR/2012
(Asst. Year : 2009-10)
ACIT-1, Vs. Vijay Kumar Mishra & Co.,
Bhilai. Vidhya Vihar, Nehru Nagar,
Bhilai (CG)
PAN No. AAFFV 1683 H
(Appellant) (Respondent)
Assessee by : Shri Amit Rai - CA.
Department By : Smt. Sheetal Verma - DR
Date of hearing : 18/04/2016.
Date of pronouncement : 21/04/2016.
ORDER
PER SHAMIM YAHYA, ACCOUNTANT MEMBER
This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), Raipur, dated 13/07/2012 and pertains to Assessment Year 2009-10.
2. The ground of appeal reads as under:-
"Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 50,00,000/- made by the Assessing Officer on account of unexplained cash credit under sec. 68 of the I.T. Act, 1961 by not accepting the principle of peak credit in the party ledger."2
ITA No. 177/RPR/2012
3. Brief facts of the case are that the assessee is a partnership firm deriving income from civil work contracts. The Assessing Officer has stated that the total turnover from the aforesaid business activity has been declared at Rs. 18.47 crore with net profit and net profit rate at Rs. 39.41 lakh and 2.13% respectively; that the corresponding figures for the immediately preceding year are Rs. 13.40 crores, Rs. 27.80 lakh and 2.07% respectively; that survey under sec. 133A of the Act was conducted at the business premises of the assessee on 26/03/2009; that as a result of survey, the assessee firm disclosed additional income of Rs.1,49,99,000/- which comprised of the following:-
a) Unexplained cash found during survey Rs. 8,20,000/-
b) Unexlained balance as per ledger in
the name "party" Rs. 1,41,79,000/-
total Rs. 1,49,99,000/-
The Assessing Officer has further stated that the above balance of Rs.1,41,79,000/- is peak balance in the name of said „Party‟ which has been offered by the assessee firm as its income in view of its inability to provide the details of said „party‟ and accordingly, the said amount has been disclosed as its additional income by the assessee firm; that during the period under reference, total cash amounting to Rs. 1,91,79,000/-
has been received by the assessee firm from the said „party‟ and cash amounting to 50 Lac has been returned back to the said „party‟; that the offer of the assessee firm of disclosing peak credit as its additional 3 ITA No. 177/RPR/2012 income, as a result of survey under sec. 133A of the Act, cannot be accepted instead the entire credit of Rs. 1,91,79,000/- deserves to be treated as undisclosed income for relevant previous year for the following reasons:-
a) that in view of the fact that the assessee has not disclosed the name of the party, it cannot be said for sure that the entire amount has been received from the single „party‟.
b) That it is also to be considered that the assessee has received cash loan from an unidentified party and it cannot be said that amount of „peak credit‟ only has been rotated, as source of cash loan remains undisclosed; that the principle of rotation and consequently that of the „peak credit‟ cannot be applied to the facts and in the circumstances of the case.
The Assessing Officer has further stated that the entire amount of cash amounting to Rs. 1,91,79,000/- received as loan from the said „party‟ as per ledger account under reference is liable to be treated as unexplained credit under sec. 68 of the Act.
4. Before the ld. CIT(A) the assessee has submitted that the assessee follows the mercantile system of accounting; that from the above method of accounting annual profits can be properly deducted; that all the papers as required by the Assessing Officer during the course of assessment were produced; that at the time of survey copy of ledger account of „party‟ was 4 ITA No. 177/RPR/2012 placed before the department based on which the income was declared; that under the pressure of survey the assessee was not in a position to disclose the nature of these entries and the detail of the amount that was received and paid under this head; that these entries may be amount received and paid from various parties as advance and even balance transfer from various sites of petty cash; that once the entire account was surrendered as income, the assessee didn‟t tried to clarify the names of the person from whom advance was received and repaid and nature of entries; that once the assessee has declared the balance of „party‟ ledger as undisclosed income and treated the same as out of books, then why the same income is being reassessed with different angle and amount declared at the time of survey is being increased by Rs. 50 Lac which was already reported to the department at the time of survey; that addition of Rs. 50 Lac to the total income of the assessee by not accepting the principle of peak credit is not justified.
5. Considering the above, ld. CIT(A) has held as under:-
"6. I have carefully gone through the assessment order and submissions of the appellant. I am of the considered opinion that the basic reason for discouraging the act of retraction of the assessee‟s after the lapse of considerable time is that the assessee restrains the department from making enquiry once he accepts the undisclosed income and makes the surrender before the survey or search team. I do find force in the submission of the appellant that ledger in question i.e. „party‟ was very much available before me the survey team. It is an undisputed fact that the survey team had accepted the amount of surrender made by the appellant in the light of entries appearing in the said ledger. In my view, the Assessing Officer has merely applied his own unsustainable logic for making the addition. If the said ledger of „party‟ is looked upon as if it was a bank account, I find that there appears a reasonable nexus between the payments received by the 5 ITA No. 177/RPR/2012 appellant (which can be equated with cash withdrawal from the bank) and payments made by the appellant (which can be equated with cash deposited in the bank). Even otherwise, it is settled principle of law that in case of addition under sec. 68 on the basis of cash deposits, only peak credits should be considered. By aggregating all deposits, they tend to get taxed twice which is against the principles of taxation. I find that the case of the appellant is squarely covered byt the following decisions:-
i) ITO v. Mahesh KumarJayantilal Vora (2004) 3 SOT 96 (Rajkot)
ii) G. Venkatareddy & Co. V. DCIT (2001) 73 TTJ (Hyd) 401.
iii) Addl. CIT v. Chetan Dass (1975) 99 ITR 46 (Del.)
7. I am of the considered opinion that once the cash receipts have been treated as income of the appellant, the Assessing Officer ought to have given due considered to the fact of availability of cash with the appellant on particular date for advancing the money. However, the Assessing Officer has failed to work out such cash in mind. There is no provision in the Act to treat the cash advance given as income of the appellant, even on this score, the addition made by the Assessing Officer becomes unsustainable, particularly, when there appears a reasonable nexus between the cash receipts that have been treated as income of the appellant on one hand and cash advance given by the appellant on the other hand. The Assessing Officer has not brought on record any evidence or cogent reason to deviate from the generally accepted peak theory. I do find force in the submission of the appellant that once the survey team had accepted the amount of income surrendered by the appellant to buy peace of mind and avoid litigation, the appellant abstained himself from defending its case and furnish explanation regarding source of cash receipts. There is no finding on record by the Assessing Officer that the unaccounted income of the appellant had been exhausted by the appellant and the appellant was left with no money to make cash payments. Looking to the facts and circumstances of the case as also decision cited above, the addition made by the Assessing Officer cannot be sustained." Against the above order, the Revenue is in appeal before us.
6. We have heard both the parties and perused the record. Before adjudicating the issue, we may gainfully refer to the „party ledger account‟ which is subject matter of discussion in this case.
6ITA No. 177/RPR/2012
VIJAY KUMAR MISHRA & CO.
Vidya Vihar, Nehru Nagar (West), Bhilai.
PARTY
01/04/2008 to 26/03/2009
Date Particulars Dr. Amount Cr. Amount Balance
17th Apr. Dr. Cash Recd. Rcpt 50,00,000
18th Apr. Dr. Cash Recd. Rcpt 50,00,000 1,00,00,000
20th May Cr. Cash Paid Pymt. 20,00,000 80,00,000
5th Aug. Dr. Cash Recd. Rcpt 20,00,000
6th Aug. Dr. Cash Recd. Rcpt 20,00,000
8th Aug. Dr. Cash Recd. Rcpt 10,50,000 1,30,50,000
5th Sep. Dr. Cash Recd. Rcpt 10,00,000 1,40,50,000
16th Oct Cr. Cash Paid Pymt. 5,00,000 1,35,50,000
15th Nov. Cr. Cash Paid Pymt. 5,00,000 1,30,50,000
23rd Dec. Cr. Cash Paid Pymt. 20,00,000 1,10,50,000
2nd Jan. Dr. Cash Recd. Rcpt 10,00,000 1,20,50,000
2nd Jan. Dr. Cash Recd. Rcpt 15,00,000 1,35,50,000
3rd Feb. Dr. Cash Recd. Rcpt 6.29,000
50,00,000 1,91,79,000
Cr. Closing 1,49,79,000
Balance
1,91,79,000 1,91,79,000
21st Mar. Dr. Opening Balance 1,41,79,000
7. Upon hearing both the counsel and perusing the record, we note that the above ledger account is the basis of assessee‟s surrender. The above said ledger account is named „party‟ and the transactions of cash receipts and payments are mentioned therein. The assessee has offered peak credit for taxation. The Assessing Officer has added the entire credit 7 ITA No. 177/RPR/2012 on the premise that the assessee has not disclosed the identity of the party from whom cash loan was received. The Assessing Officer has written in the concluding part of his order that the fact of borrowing and paying back cash loan was never denied by the partner of the firm. The ld. CIT(A), on the other hand, has held that there is no provision in the Act to treat the cash advance given as income of the assessee. The ld.CIT(A) has further held that Assessing Officer has not brought on record any evidence or cogent reason to deviate from the generally accepted peak theory. The ld. CIT(A) has also noted that survey team had accepted the amount of income surrendered by the assessee.
8. Upon careful consideration, we find that the sole basis of Assessing Officer‟s addition in this case is the above mentioned ledger account. It is well settled proposition enshrined in the common law maxim of "approbate and reprobate" that a document cannot be accepted and rejected at the same time. When the credits are being accepted as receipt/income, there is no reason why the debits in the same page should not be treated as payments/expenditure. It is also not the case that any other cogent material was found during the course of search substantiating that the entire credit of Rs. 1,91,79,000/- deserves to be treated as undisclosed income of the assessee. Since, the entire survey records have not been produced before us, we deem it appropriate to remit the issue to the file of the Assessing Officer. The Assessing Officer is directed to examine the issue afresh and bring on record any cogent 8 ITA No. 177/RPR/2012 material to substantiate his claim that the entire credit is the income of the assessee. Needless to add, assessee should be granted adequate opportunity of being heard.
9. In the result, appeal filed by the Revenue stand allowed for statistical purposes.
Order Pronounced in the open Court on 21/04/2016.
Sd/- sd/-
(PARTHA SARATHI CHAUDHURY) (SHAMIM YAHYA)
Judicial Member Accountant Member
Dated : 21 s t April, 2016.
vr/-
Copy to:
1. The Assessee.
2. The Revenue.
3. The CIT
4. The CIT(A)
5. The D.R.
6. Guard file.
By order
Assistant Registrar
I.T.A.T., Raipur.