Income Tax Appellate Tribunal - Lucknow
Shri Sanjay Singh Chauhan, Lucknow vs Deputy Commissioner Of Income Tax, ... on 28 February, 2019
Stay Application No.02/Lkw/2019
(in I.T.A. No.400/Lkw/2018 1
Assessment Year:2015-16
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH 'B', LUCKNOW
BEFORE SHRI A. D. JAIN, VICE PRESIDENT
AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
Stay Application No.02/Lkw/2019
(in I.T.A. No.400/Lkw/2018)
Assessment year:2015-16
&
I.T.A. No.400/Lkw/2018)
Assessment year:2015-16
Shri Sanjay Singh Chauhan, Vs. Dy.C.I.T.,
E-7, LDA Colony, Sector-C-1, Range-6,
Kanpur Road, Lucknow. Lucknow.
PAN:AISPC 8502 F
(Appellant) (Respondent)
Appellant by Ms Sweta Mittal, F.C.A.
Respondent by Shri Sushil Kumar Madhuk, CIT, D.R.
Date of hearing 20/02/2019
Date of pronouncement 28/02/2019
ORDER
PER T. S. KAPOOR, A.M.
This appeal has been filed by the assessee against the order of learned CIT(A)-II, Lucknow dated 13/03/2018 pertaining to assessment year 2015-2016. In this appeal the assessee has raised the following grounds of appeal:
"1. BECAUSE the authorities below have erred in law and on facts in making addition of Rs.216,75,63,154/- (say Rs.216.76 crores) on the basis of book referred to as 'duplicate book' marked as Annexure'A2 found from the premises of the appellant, during the course of survey u/s 133A/search and Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 2 Assessment Year:2015-16 seizure action u/s 132(1) on 13/01/2015 at his premises at Delhi.
2. BECAUSE looking to the record referred to as 'duplicate book', it was clearly borne out that
a) the appellant was merely a courier, handling cash on behalf of others;
b) names of the persons on whose behalf cash was being handled by him were duly mentioned in the said records;
c) against the receipts aggregating Rs.216,75,63,154/- there were deliveries also of cash which too were recorded in the said duplicate book (as referred to by the authorities below); and
d) the appellant was in receipt of brokerage and accordingly, the appellant could not have been subjected to assessment on the basis at receipts aggregating Rs.216,75,63,154/- (as found recorded in the 'duplicate book and the addition made/sustained by the authorities below was wholly illegal.
3. BECAUSE keeping in view the provisions contained in law, particularly section 132(4A) read with section 292C, the explanation given by the appellant at the time of survey/ search and later on during the course of assessment proceedings, was liable to be accepted, and no addition for sums found entered into the said 'duplicate book' (as referred to by the authorities below) could have been made either on facts or in law.
4. BECAUSE, in any case and looking to the manner in which the entries were found recorded in the seized material, referred to as 'duplicate book' by the authorities below) and on a due consideration of settled position of law, only peak of such receipts/ payments could have been considered by the authorities below, for the purposes of making assessment in the case of the appellant.
5. BECAUSE on a settled principle of law that taxes can be collected only on the basis of income as found to be assessable under the Act, irrespective of any book entry/ income shown in the "return", the CIT(A) should have held that only peak of Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 3 Assessment Year:2015-16 receipts /payments as arranged date wise, could have been considered as income of the appellant even after his explanation about the entries and the presumption of law as contained in section 132(4A) read with section 292C were to be ignored.
6. BECAUSE such 'peak', as arrived at after arranging receipts/ payments date wise Liable to be substituted for Rs.4,16,14,760/- as had been declared as income of the appellant.
7. BECAUSE the view taken by the authorities below is based on mere surmises conjectures and the same was not sustainable either on fact or in law.
8. BECASE the order appealed against is contrary to the facts, law and principles of natural justice."
2. At the outset, Learned A. R. submitted that a survey action was conducted on 13/01/2015 on the business premises of the assessee and unaccounted cash amounting to Rs.4,16,10,000/- was found and therefore, the survey was converted into search & seizure operation. During the search & seizure operation, a number of documents were found. It was submitted that a duplicate book marked as 'A2' from pages 1 to 77 was found and seized wherein date-wise cash receipts amounting to Rs.216,75,63,194/- were recorded between the period from 19/10/2014 to 13/01/2015. Learned A. R. in this respect invited our attention to para 4 of the order of the Assessing Officer where the Assessing Officer has noted the date-wise receipts as recorded in pages 1 to 77 of book marked as 'A2'. Learned A. R. submitted that assessee was engaged as Hawala operator whereby he used to collect amounts from various persons based in Lucknow and used to pass on the same to the persons in Delhi as directed by his clients in Lucknow and the assessee used to earn Rs.150/- to Rs.300/- per lakh. Learned A. R. submitted that during the recording of statement of the assessee and the statement of the employees of the assessee, the detailed Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 4 Assessment Year:2015-16 modus operandi of the business of the assessee was explained. However, the Assessing Officer treated the entire amount as unexplained credits and made the addition u/s 68 of the Act. Learned A. R. submitted that the assessee has been maintaining consistent stand that he was engaged in the business of Hawala and money did not belong to him but the authorities below made the addition by holding that the assessee was not able to prove the identity, creditworthiness and genuineness of the persons from whom the amount was received. Learned A. R. in this respect invited our attention to the statement on oath of Shri Santosh Kumar and Shri Irshad Khan who were employees of the assessee and also invited our attention to the statement of the assessee recorded by the ADIT (Inv.), placed at pages 31 to 62 onwards of the paper book wherein the assessee and employees had clearly stated that assessee was engaged in the Hawala business. Learned A. R. submitted that the same submissions were made before learned CIT(A) also and alternative submissions were also made before learned CIT(A) to take the peak credit as income of the assessee. Learned A. R. submitted that since the assessee had received cash on various dates to be delivered to persons as per their directions and assessee had actually delivered the same and had recorded such remittances as "Kharcha" on the same page in the same diary and therefore, the income earned from these transactions should have been taken and in the alternative, any peak amount should have been considered for making additions. Learned A. R. submitted that in fact the assessee had himself declared the cash impounded as income from other sources and had filed return of income and our attention was invited to copy of computation of income placed at page 24 of the paper book. Learned A. R. submitted that the assessee, before the learned CIT(A), had relied on a number of case laws for the proposition that where the tax authorities relied on one part of the transaction, the other part of the transaction, recorded on the same Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 5 Assessment Year:2015-16 document, cannot be ignored. In this respect our attention was invited to page 18 of the CIT(A)'s order where the learned CIT(A) has reproduced the case laws relied on by the assessee. Learned A. R. also invited our attention to a statement of Shri Rajneesh Kumar who was present at the time of survey and who had come to collect amount on behalf of some person.
3. Learned D. R., on the other hand, submitted that assessee was not able to prove the identity, creditworthiness and genuineness of the persons from whom the amounts were received. It was submitted that the Assessing Officer had issued notices u/s 131 of the Act to eight persons out of which the notices were returned unserved in case of five persons and only two persons appeared and recorded their statements wherein they refused to have entered into any transaction with the assessee. Therefore, it was argued that the statement of the assessee cannot be relied and the assessee was not able to prove the identity, creditworthiness and genuineness of the persons therefore, authorities below have rightly made the addition u/s 68 of the Act.
4. We have heard the rival parties and have gone through the material placed on record. We find that during survey operation conducted on 13/01/2015, unaccounted cash amounting to Rs.4,16,10,000/- was impounded and a duplicate book, marked as A2, running from pages 1 to 77, was also seized. We find that the Assessing Officer has recorded the date-wise receipts on the basis of entries in the so called duplicate book and has calculated the total receipts of the assessee from 19/10/2014 to 13/01/2015 at Rs.216,75,63,154/-. The authorities below wanted the assessee to prove the genuineness, creditworthiness and identity of the persons from whom such payments were received whereas on the other hand the assessee kept on saying that he was involved in the Hawala business and the amount belonged to various persons on whose directions Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 6 Assessment Year:2015-16 the same was delivered to the persons in Delhi. The Assessing Officer, on the basis of names recorded in the diary, issued notices u/s 131 of the Act to 8 persons out of which, notices of 5 persons came back undelivered whereas one person did not appear and 2 persons gave the statement and in the statement the persons covered u/s 131 of the Act, denied of having entered into any transaction with the assessee and therefore, the Assessing Officer held the same to be unexplained money found credited in the books of account and made addition u/s 68 of the Act. Before learned CIT(A), detailed submissions were made by the assessee which were forwarded to the Assessing Officer for his remand report and in the remand report, again the Assessing Officer reiterated his stand taken during assessment proceedings. The assessee filed counter reply to the remand report where the assessee argued that the Assessing Officer had not made any further inquiries from the employees and has not considered the contentions of the assessee that he was dealing in Hawala transactions and the entire receipt of the assessee has been made taxable in his hands. However, learned CIT(A) dismissed the appeal of the assessee holding that assessee was not able to prove the identity, creditworthiness & genuineness of persons from whom the money was received. We find that assessee had relied on a number of case laws for the proposition that while relying on one part of transaction, the other part of the transaction cannot be ignored. In the present case, in the diary, marked as 'A2' on page 1 to 77 placed at pages 63 to 213 of the paper book, we find that there are recording of cash receipts and also there is mention of Kharcha which has been subtracted from the total receipts and the balance has been carried forward to next date and again on next date the receipts of that date have been added and Kharcha of that day has been subtracted and this method has been continued till the end. The authorities below have made the addition by making total of receipts of each day while they have ignored the other part Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 7 Assessment Year:2015-16 mentioned on the same diary in the form of Kharcha. The Learned A. R. had argued that this Kharcha represent the amounts of money remitted on the basis of directions of the clients and therefore, this should have also been considered while working out the unaccounted income of the assessee. We find that Hon'ble Guwahati High Court in the case of Kamal Kumar Saharia vs. CIT [1995] 216 ITR 217 (Gauh) has held that it was a settled law that tax authorities having relied on one part of transaction, cannot reject the other part of the same transaction. Further we find that commentary on Income Tax law by Chaturvedi & Pithisaria's, Volume 1 page 375/376, 5th Edition discussed the doctrine of approbate and reprobate, being not applicable to income tax proceedings. The detailed discussion on this doctrine reads as under:
"Doctrine of approbate and reprobate, not applicable to tax proceedings- Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that 'a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage [R.N. Gosain v Yashpal Dhir, (1992) 4 SCO 683 (SC)]. This view has been followed in Lalsingh Estate(P) Ltd v CIT [(1995) 216 ITR 644, 650 (Gauh.)]. "A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction"
[Per Scrutton LJ, in Verschures Creameries Ltd. V Hull & Netherlands Steamship Co. Ltd., (1921) 2KB 608]. Thus, the maxim that a person cannot "approbate and reprobate" is only one application of the doctrine of election, and that its operation must be confined to reliefs claimed in respect of the same transaction and to the persons who are parties thereto [Nagubai Ammalb B. Shama Rao, AIR 1956 SC 593, 602; Jiwan Das v Smt Sarla Dew, AIR 1976 All 216]. The doctrine of Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 8 Assessment Year:2015-16 "approbate and reprobate" is only a species of estoppels; it applies only to the conduct of parties. As in the case of estoppels, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppels or any other equitable doctrine. Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not. If it is not, the Assessing Officer has no power to impose tax on the said income [CIT v M.R.P. Firm, (1965) 65 ITR 67, 74 (SC); E.D.Sassoon & Co. Ltd. VCIT. (1968) 70 ITR 561, 580 (Bom), affirmed, (1972) 86 ITR 757 (SC); Union of India v ITC Ltd., (1976) Tax LR 2003, 2009 (Karn.); Pari Mangaldas Girdhardas v CIT, (1978) Tax LR (NOC) 91 (Guj) (1977) CTR (Guj) 647; Indian Organic Chemicals Ltd. V Union of India, (1979) Tax LR (NOC) 134 (Del); C.V. Ramana v CIT, (1990) 181 ITR 248, 256 (AP)] Once the Assessing Officer assesses a particular receipt under a particular head of income, that amount is no more available to him for assessment under another head. The Revenue cannot approbate and reprobate. It cannot be permitted to treat a part or the whole of the consideration as dividend and to assess the same as such and also to say that this will not have the effect of reducing the amount of consideration for (P) Ltd., (1993) 202 ITR 932, 941, 938 (Bom)] So much so, it is settled law that the tax authorities having relied on one part of a transaction cannot reject the other part of the same transaction [Kama/ Kumar Saharia v CIT, (1995) 216 ITR 217, 221 (Gauh)] The assessee having taken the benefit of a particular decision or direction cannot contend against such decision or direction. This is so because the assessee cannot approbate or reprobate at the same time [Hope (India) Ltd v CIT, (1993) 203 ITR 118, 123 (Cat)] Thus, the respondent having prevented the appellants from getting a declaration that the entire gift deed was invalid in lieu of which they gave up, because of the compromise, their claim for the property in dispute cannot be permitted to turn round now and take the stand; 'Heads I win, tails you lose'. Law has to promote justice. The Courts of equity and justice cannot Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 9 Assessment Year:2015-16 uphold such an unfair stand. The respondent cannot be permitted to reprobate to his advantage. The binding effect of the compromise decree could not be taken away as it was to operate after death of the donor [Bakshi Ram v BrijLal, (1994) Supp (3) SCO 198, 200-01 (SC)]"
In view of these and in view of facts and circumstances, we are of the considered opinion that authorities below should have considered the other part of the transaction which has been relied for making addition. We further find that assessee has been maintaining his stand from the very beginning that he was engaged in the Hawala business and for which he used to earn income ranging from Rs.150/- to Rs.300/- per lakh. For the sake of convenience, questions and answers No. 5 and 7 of the assessee's statement dated 03/12/2015 recorded by ADI u/s 131 of the Act are reproduced below:
" न 5: कृपया बताइये क आप हवाला का काय कब से कर रहे ह व उसमे आपको कतना कमीशन मलता है ?
उ"र :यह काम #पछले 8-9 मह(ने से कर रहा हूँ । उसमे हमे कमीशन एक लाख के बदले 150 से 300 2पए तक मलता है ।
न 7 : कृपया बताइये क यह पैसा कस लए आता है व आपको उसमे 4या कमीशन मलता है ?
उ"र :यह पैसा हवाला का पैसा है । यहाँ हम5 कमीशन के 6प म5 1,00,000/- (एक लाख) 2पए पर 300 2पया मलता है। यह पैसा सब लखनऊ म5 मलता है । हम यहाँ से सफ डेल(वेर( दे ते ह ।"
We further find that the statements of the employees of the assessee were also recorded during the course of search on 13/01/2015 whereby Shri Irshaad Khan, one of the employees of the assessee, had also affirmed that the assessee was engaged in the Hawala business. The relevant questions and their answers, as reproduced by learned CIT(A) art page 29 of his order, are reproduced below:
Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 10 Assessment Year:2015-16 " न 5: कृपया लखनऊ से <द=ल( या>न पा<टय@ का पैसा दे ने तक सार( Aया बताएं क आप कैसे पैसा लेते ह, कैसे लखनऊ से <द=ल( लाते ह फर पा<टय@ क पहचान कैसे होती है ?
उ"र :लखनऊ से िजFह5 पैसा <द=ल( भेजना होता है वे हमारे मा लक के ऑ फस मे पैसा जमा कराते ह। हमारे मा लक संजय चौहान अशोक साड़ी कोLरयर के Mवारा <द=ल( साNड़य@ क पै कं ग मे लपेटकर लाया जाता है फर पाटP का टोकन न॰ का SMS आता है और हम टोकन न॰ दे खकर उनको पेम5ट दे दे ते ह । न 6: कृपया बताएं क टोकन न॰ 4या होता है ?
उ"र:जब पाटP अपना पैसा दे ती है तो वो अपने कसी नोट यानी 10 2पए / 5 2पए/ 1 2पए/ 2 2पए आ<द का नोट का न॰ मा लक दो नोट कावा दे ते ह । Vी संजय जी हमार( दक ु ान या न॰, फोन न॰ दे दे ते ह। पाटP यहाँ फोन करके पूछते ह मैसेज आया या नह(ं । हम लखनऊ से नोट का न॰ message कर <दया जाता है / पाटP का कोई आदमी वह( न॰ वाला नोट लेकर आता है और पेम5ट ले जाता है। वह( Aया है ।
Similarly in the statement of Shri Rajneesh Kumar, who had come to receive money in the office of Delhi during the course of search dated 13/02/2015, had answered to question No. 4 that he had come to collect Rs.3,00,000/- on behalf of Shree Naveen Agarwal. The relevant question and answer, as reproduced by learned CIT(A) at page No. 30 and 31 of his order, are reproduced below:
" न 4 :कृपया बताएं क आप यहाँ कस लए आए ह ?
उ"र: म यहाँ 3 लाख 2पए पेम5ट लेने आया थी। मुझे Vी नवीन अ\वाल जी ने टोकन के 6प म5 मुझे एक 10 2पए का नोट <दया िजसका न॰ 77F802376 है । मुझे ये टोकन <दखाकर तीन लाख 2पए क पेम5ट लेनी थी।"
All these facts taken together, demonstrate that the assessee was indeed engaged in the business of Hawala and rather this fact has been accepted by the Assessing Officer in para 2 of his order where he has held that assessee was found to be engaged in the business of Hawala. Therefore, the addition sustained by learned CIT(A) by holding the entire income being Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 11 Assessment Year:2015-16 assessee's unexplained income u/s 68, is not justified as the money did not belong to the assessee. Moreover, we find that the assessee was not maintaining any books of account and no books of account were found during the survey/search and only diary was found and therefore, also the addition cannot be made u/s 68 of the Act as no amount was found credited in the books of account. Under these circumstances, we are of the considered view that the Assessing Officer should recalculate the unaccounted income of the assessee by taking peak credit by considering both debit and credit entries in the diary. Hon'ble Allahabad High Court in the case of CIT vs. Fertilizer Traders [2014] 42 Taxmann.com 476 (Allahabad) has held that under such circumstances each credit and debit entry appearing has to be arranged chronologically and data-wise and only addition should be made of the peak amount. The finding of Hon'ble court, as contained from para 5 onwards, are reproduced below:
"5. The brief facts of the case are that on 12.02.1997, a search and seizure operation was conducted under Section 132 of the Act at the business and residential premises of both the assessees. M/ s. Fertilizer Traders was assessed in the status of firm, where it has two partners, namely, Sri Vinod Saraf and Sri Atul Saraf. M/s. Saraf Trading Company was having partners, namely, Smt. Usha Devi Saraf; Smt. Prakashi Devi Saraf, Smt. Makhani Devi Saraf and Sri Arun Kumar Saraogi. The assessees are also involved in the agriculture activities. During the course of search, various incriminating documents were found and seized. It was also found that the assessees were maintaining two sets books of account and made the investment outside the books. So, the AO made the additions, which was partly deleted by the first appellate authority. The Tribunal has restored the matter to the file of the AO for recomputation. Being aggrieved, the Department has filed the present appeals.
6. With this background, heard Sri R.K. Upadhayay, learned standing counsel for the Department, who had justified the order passed by the AO. He submits that the Tribunal has restored the matter back to the AO with various directions. For the purpose, he read out Para-65 & 66 of the Tribunal's order.
Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 12 Assessment Year:2015-16
7. According to the learned counsel, two sets of the account/books were found during the course of search. In addition, a computer floppy was also found. The two sets of the entries defined the total limb of undisclosed income as assessable in block assessment.
8. Learned counsel submits that on the basis of an affidavit of Sri Vinod Saraf, the peak of the debits and credits entries were prepared by the AO for the purpose of computation of undisclosed income. Thus, there was no scope to give any direction for the recomputation of the peak of debits and credits entries.
9. He has drawn the attention to Paras-74 & 75 of the impugned order, where the directions were issued to the AO. On reproduction, the observations and directions read as under:-
"74. We are also aware of the fact that though the assessee has filed explanation before the AO to consider full accounts of the ledger for the purpose of working out of the peak, but the AO and the CIT(A) did not consider the same and have not given any finding. When later on the assessee prepared summary of the peak on the basis of the principle mentioned above, the AO and the CIT(A) while disposing of the matter under Section 154 of the Income-tax Act, 1961 did not consider the same. Similarly, the CIT(Central), Kanpur did not consider this matter while taking action under Section 263 of the Act. Therefore, considering the above facts and in order to give opportunity to the AO to consider this aspect of the matter, it would be appropriate and reasonable to set aside the findings of the AO and the CIT(A) on the issue and restore the matter to the AO. In view of our above findings, we restore the issue relating to the computation part only of the undisclosed income to the file of the AO with the following directions:
(i) Each credit/debit entry appearing in the computer print outs for financial year 1994-95 and 1995-96 and computer print outs for financial year 1996-97 (As segregated by the AO himself at the original stage of computation of undisclosed income) shall be arranged chronologically and datawise.
(ii) From the aforesaid figure, the day to day cash book should be prepared (as is shown by the assessee) so as to find out the negative cash balance as on different dates.
(iii) Thereafter in order to work out the computation of the disclosed income, the receipts as well as the Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 13 Assessment Year:2015-16 payments as would be appearing in the cash shall be arranged date-wise chronologically.
(iv) While making such arrangements, the AO so far as financial year 1996-97 is concerned, shall exclude the amounts, which had already been segregated by him in the copies of computer print outs as had been available to the assessee on the grounds that segregated items were verifiable from Manual account.
(v) The undisclosed income so worked out in the aforesaid manner shall be allocated between the two firms in the same ratio as had been done earlier at the time of the block assessment vide order dated 24.2.1999."
10. Learned counsel submits that the said directions are not required. Lastly, he made a request that the impugned order may kindly be set aside.
11. On the other hand, learned counsel for the assessee had justified the impugned order passed by the Tribunal. He submits that in the instant case, the peak was worked out by the AO on the basis of pick and choose. So, the Tribunal has rightly directed to work out the peak on the basis of the entries. The correct entries were brought to the notice by the an affidavit filed by the partner, namely, Sri Vinod Saraf. So, the Tribunal has directed for re-computation.
12. In support of his argument, learned counsel for the assessee relied on the ratio laid down in the following cases :-
(i) Commissioner of Income-tax vs. Milton Laminates Ltd.; (2013) 37 Taxmann 249;
(ii) Gujarat Gas Co. Ltd. vs. Jt. CIT; (2000) 245 ITR 84;
and
(iii) CIT vs. Bekelitle Hylam Ltd., (1999) 237 ITR 392.
13. After hearing both the parties and on perusal of the record, it appears that the basic dispute is regarding the re-computation of the peak pertaining to the credits/debits for the purpose of undisclosed income. The Tribunal in its impugned order has observed that :-
"... We fail to understand as to how the AO has worked out the peak on the basis of pick and choose. It is settled law that in the block assessment, the computation of undisclosed income could be made only on the basis of seized material and matters seized during search. The AO cannot ignore some material."
Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 14 Assessment Year:2015-16
14. Regarding the peak theory, it may be mentioned that the peak theory was defined in the Sampath Iyengar's Law of Incometax, Vol.-3, 9th edition, page 3547. Accordingly, "Peak credit" theory - One of the commonest defects of an assessee, where a single credit or number of credits appear in the books in the account of any particular person side by side with a number of debits is that they should all be arranged in serial order, that a credit following a debit entry should be treated as referable to the latter to the extent possible and that, not the aggregate but only the "peak" of the credit should be treated as own explained. To give a simple example, suppose there are credits in the assessee's book in the account. A or Rs.5,000 each on 1st October, 1990 and again on 5th November, 1990 but there is a debit by way of repayment shown on 27th October, 1990, the explanation will be that the credit appearing on 5th November, 1981 has or could have come out of the withdrawal/repayment on 27th October, 1981. This plea is generally accepted as it is logical and acceptable (whether the creditor is a genuine party or not), provided there is nothing in the material on record to show that a particular withdrawal/repayment could not have been available on the date of the subsequent credit.
15. A refinement or extension of the plea occurs where the credits appear not in the same account but in the accounts of different persons. Even then, if the genuineness of all the person is disbelieved and all the credits appearing in the different account are held to be the assessee's own moneys, the assessee will be entitled to set off and a determination of the peak credit after arranging all the credits in the chronological order.
16. Such proposition was also considered by this Hon'ble Court in the matter of CIT vs. Neemar Ram Badlu Ram, 122 ITR 68 (All) in which the relevant paragraphs are reproduced as under:-
"The Tribunal also did not agree with the departmental authorities that merely because the assets in the balance sheet changed from time to time, the difference would not be available for explaining a similar difference in subsequent years."
17. In the light of above discussion, we find nothing wrong in the directions given by the Tribunal before restoring the matter back for re-computation.
18. It also appears from the impugned order passed by the Tribunal that the direction was given to AO to pass the fresh order Stay Application No.02/Lkw/2019 (in I.T.A. No.400/Lkw/2018 15 Assessment Year:2015-16 within a period of four months. By now, certainly, the AO might have passed the assessment order. During the course of arguments, none of the learned counsel was able to tell the status of fresh assessment order. When the matter has been restored to the AO and consequential order might have been passed, then the present appeals have lost its efficacy. On merit also, we find nothing wrong in the impugned order passed by the Tribunal, where the matter was restored to the AO with certain direction, as stated earlier. Hence, we decline to interfere with the impugned order passed by the Tribunal. The same is hereby sustained along with the reasons mentioned therein.
19. When the matter is restored back to the AO for fresh adjudication, then the answering to the substantial questions of law, which are based on facts, need not required. In the result, all the appeals filed by the Department are hereby dismissed."
5. In view of the above facts and circumstances of the case and judicial precedents, we set aside the order of learned CIT(A) to the file of the Assessing Officer with the direction to calculate the peak credit and if peak credit is found less than the income declared by the assessee consequent to search then the income returned should be accepted and if the peak credit is more than the returned income then peak credit should be accepted.
6. In the result, the appeal of the assessee is allowed for statistical purposes.
7. Since we have allowed the appeal of the assessee for statistical purposes., the Stay Application of the assessee has become infructuous and is dismissed.
(Order pronounced in the open court on 28/02/2019) Sd/. Sd/.
( A. D. JAIN ) ( T. S. KAPOOR )
Vice President Accountant Member
Dated:28/02/2019
*Singh
Stay Application No.02/Lkw/2019
(in I.T.A. No.400/Lkw/2018 16
Assessment Year:2015-16
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. The CIT(A)
5. D.R., I.T.A.T., Lucknow
Assistant Registrar