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5. Consequent to search, notice u/s 153A of the Income-tax Act was issued on 19-01-2013 requesting to prepare a true and correct return of total income. In response to the notice, the assessee has filed the return of income on 23-09-2013 declaring total income at Rs.1,54,36,700 after claiming deduction of Rs.89,94,609 u/s 80IB(10) of the Income-tax Act, 1961. The case has been selected for scrutiny and notices u/s 143(2) and 142(1) of the Act along with questionnaire were issued. In response to the notices, the authorized representative of the assessee appeared Akshar Devlopers group from time to time and filed various details, as called for. During the course of assessment proceedings the AO observed from the return of income filed by the assessee that though the assessee has admitted undisclosed income of Rs.12,19,50,872 in respect of unaccounted cash transactions recorded in rough cash book, failed to admit such undisclosed income in the return of income u/s 153A of the Act. Therefore, called upon the assessee to explain as to why the undisclosed income admitted during the course of search in the statement recorded u/s 132(4) cannot be added. In response to the showcause notice, assessee has filed a reply in the form of a booklet explaining the reasons for not admitting the undisclosed income admitted during the course of search. According to the assessee, there was a mistake in disclosure of Rs.14,19,10,000 made during the course of search on account of unaccounted cash receipts found in rough cash books No.1 & No.2. The assessee also suggested two methods of determining undisclosed income, according to which the assessee has worked out peak cash theory for determining undisclosed income in respect of unaccounted cash receipts and cash payments as per rough cash book. Alternatively, the assessee pleaded for a reasonable rate of profit on the receipts treating the same to be on-money. The assessee has filed a working of gross receipts as per the rough cash book which worked out to Rs.27.59 crores the details of which has been reproduced Akshar Devlopers group by the AO in the assessment order at para 5.3 on pages 7 & 8. As per the workings provided by the assessee, out of the total receipts of Rs.46.23 crores as recorded in rough cash books, the assessee has determined net cash receipts of Rs.27.59 crores attributable to its business receipts on which a reasonable net profit of 10% may be estimated. In the total cash receipts, the assessee has deducted cash drawn from bank, cash with employees, loan received from individuals. Similarly, the assessee has worked out peak cash theory as per the rough cash book and determined peak cash balance as on 02-06-2010 which worked out to Rs.2,73,87,071/- which has been distributed equally between two partners and suggested for addition. To substantiate plea of peak cash credit theory, the assessee has further argued that unsecured loans from various individuals are not on-money and the details of the above payments are recorded in RCB Bundle No.1. Similarly, receipt of on-money amounting to Rs.3.82 crores from different projects, which has been handed over to Shri Hari Bachubhai Mujat, as admitted by Shri Manoj B Gogta and the amount of Rs.2.21 crores arising from Hari Bachubhai Mujat's account already stood accounted for. For advocating peak cash theory, the assessee has given various reasons as per which the RCB is a cash book recording inflow and outflow of cash including cash recorded in regular cash book. The said RCB contained entry of cash for credit for group as a whole but not Akshar Devlopers group specific to any single entity in the group. The inflow is in the form of cash withdrawals from bank, receipt of investors money, sale proceeds of land, unsecured loan, return of payment from employee, etc. the outflow is in the form of cash deposit in bank, repayment of loan, money given to broker of land, repayment to investor, expenses and money given to employees. The inflow and outflow matches with total money inflow at Rs.41.21 crores and total money outflow at Rs.41.73 crores. There is no evidence to support the true nature of these entries and this can be explained only through personal knowledge and belief. The cash found recorded in other seized documents is also recorded in RCB and, therefore, the RCB is the best document which contained total transactions of the group as well including the assessee firm. Therefore, it is very difficult to ascertain true nature of these entries and accordingly, a reasonable income may be determined either by going on the basis of peak cash theory or by estimation of income.

6. The AO, after considering submissions of the assessee and also on analyzing the seized materials and statement recorded from the partner Hari Bachubhai Mujat observed that the assessee has categorically admitted during the course of search that the entries contained in rough cash book are on-money received from its real estate business and also payment to unaccounted expenditure in respect of its business and accordingly, worked out an undisclosed income of Rs.16,04,84,872/- and Akshar Devlopers group offered for 3 years vide its letter dated 17-10-2011. These transactions were not recorded in the regular books of account. This fact has been confirmed in the statement recorded u/s 132(4) on 29/9/2011and 17-10- 2011. The amount of unexplained cash credit though disclosed by the assessee firm during the search operation, neither was the same offered in the return of income nor did the assessee pay any tax on it. Therefore, there is no merit in the contention of the assessee that the source of such investment is already explained and no separate addition can be made. The AO further observed that after going through the submissions in respect of the plea of peak cash credit theory as suggested by the assessee keeping in view the nature of transactions, the entries reflected in the documents found and seized by the search party, he was of the opinion that the assessee's plea for peak cash credit theory does not hold good as it can be applied only when the assessee has rotated its cash and also there was frequent withdrawal and deposit of cash in the books of account. The transaction recorded in the RCB are not homogenous in nature and reflects receipt of unaccounted cash and its application as investment and expenditure. The entries recorded in RCB-1 and RCB-2 are outside the books of account and hence, there is no merit in the arguments of the assessee that peak credit theory needs to be followed to ascertain correct income. The AO, after considering the submissions of the assessee explaining the peak cash Akshar Devlopers group theory and also on analysis of cash book prepared by the department on the basis of rough cash book observed that on analysis of entries found in the RCB, the receipts are mainly on account of amount received from investors and payments are related to investments made by the assessee, expenditure in respect of its project and cash given to employees of the group. Since the assessee has not been able to explain the true nature of entries recorded in the rough cash book and also the fact that it has admitted undisclosed income during the course of search and also in the post search investigation, rejected explanations of the assessee with regard to the peak cash theory and estimation of reasonable net profit of gross profit considering it as on-money and made addition of Rs.12,19,50,872 to the total income of the assessee.

14. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in not accepting the peak theory adopted by the assessee and offered as income by the partners of the assessee firm without appreciating the fact that it is very difficult to ascertain true nature of transactions recorded in rough cash books No.1 & 2 as the said seized RCBs 1 & 2 contained total cash receipts and payment of Akshar group as a whole, but not Akshar Devlopers group confined to the assessee firm alone. The Ld.AR further referring to the paper book filed during the course of hearing submitted that the assessee firm has worked out peak credit theory on the basis of RCBs 1 & 2 and analysed total transactions recorded in receipts as well as payments in respect of all the payments and determined peak cash as on 02-06-2010 which worked out to Rs.2,73,83,071 which has been distributed equally between two partners and considered in their individual hands. The Ld.AR further submitted that even going by the analysis of rough cash book 1 & 2 made by the AO by entering into the transaction in tally software, it is abundantly clear that the AO failed to establish the true nature of transactions and hence made additions only on the basis of surrender made during the course of search ignoring the fact that the surrender was made without going through the seized materials. The Ld.AR further submitted that the transactions recorded in RCB 1 & 2 relate to total group which included on-money received from sale of flats, unsecured loan borrowed from certain persons and also cash withdrawals from bank. Certain transactions have already been recorded in regular books of account. Therefore, making addition only on the basis of admission without any corroborative evidence to establish that it represents undisclosed income of the assessee is incorrect. The Ld.AR further submitted that when it is not possible to ascertain to any true nature of transaction, the best method to determine Akshar Devlopers group undisclosed income is to peak credit theory which has been accepted by the Courts, including the Hon'ble Andhra Pradesh High Court in the case of CIT vs Purshottam Jhawar (2013) 40 taxman.com 533 wherein the court held that application of peak credit concept for quantifying the undisclosed income is not contrary to the provisions of the Act. The Ld.AR further submitted that in case, the peak credit theory is not acceptable, then the second method for determination of undisclosed income is estimation of reasonable net profit on total receipts recorded in undisclosed rough cash book. Therefore, requested for estimation of net profit of 10% on total receipts quantified on the basis of those cash book at Rs.27.59 crores.

17. The AO has made addition on the basis of admission of the assessee during the course of search. According to the AO, admission is the best piece of evidence and hence, the assessee cannot go back from its admissions without any valid retraction with supporting evidence. The AO further was of the opinion that even going by the analysis of RCB 1 on the basis of trial balance prepared in tally software, though the receipts and payments are almost equal, the receipt side Akshar Devlopers group comprise of major amount received from investors which is nothing but on-money received from sales and payment side consists of expenses incurred for projects and amount given to employees. Therefore, he opined that admissions made by the assessee is on the basis of incriminating material found as a result of search in the form of RCB. No doubt, admission in the course of search by way of a statement u/s 132(4) is the best piece of evidence, but not conclusive one. Unless the admission is corroborated by further evidences in the form of incriminating material, the AO cannot make addition only on the basis of admission by the assessee. We further notice that the assessee has analysed RCB 1 & 2 and as per which the RCB is a cash book recording inflow and outflow of cash including cash transactions recorded in regular cash book. The said RCB contains entry of cash for group as a whole, but not specific to any single entity in the group. The inflow is in the form of withdrawals from bank, receipts from investors money, sale proceeds of land, return of payment from employees, etc. The outflow is in the form of cash deposit to bank, repayment of loan, money given to broker, land cost, repayment to investors, expenses and money given to employees. The inflow and outflows are closely matches with total money in which is at Rs.41.27 crores and total money "out" is at Rs.41.37 crores. There is no evidence to support the true nature of these entries and this can be explained only through personal Akshar Devlopers group knowledge and belief. Even going by the analysis of the AO on the basis of trial balance prepared on the basis of RCB 1 & 2, the AO is unable to identify true nature of transactions recorded in RCB 1 & 2. The trial balance extracted by the AO is part of assessment order at para 4.1 on pages 4 to 6. On analysis of the trial balance prepared by the AO, we find that the credit side represents amount received from investor. The payment side represents amount paid for investments, expenses for the project, cash deposits to bank, departmental payments and amount paid to employees. The assessee explains that the amount paid to employees represents amount taken by the group either for expenses or payments for purchase of properties. Therefore, we are of the considered view that it is very difficult to ascertain the true nature of transactions recorded in rough cash book 1 & 2 on the basis of analysis made by the AO. Under these circumstances what would be the method to determine undisclosed income from these transactions. The assessee argued for peak credit theory. The assessee has arrived at a peak cash credit as on 02-06-2010 at Rs.2,73,87,071 which was distributed equally between two partners. The assessee also worked out gross receipts recorded in RCB and after reducing cash with for employees and cash drawn from bank, determined total receipts of Rs.27.59 crores. Peak cash credit theory advocated by the assessee cannot be accepted as it applies only in a case where the cash has been Akshar Devlopers group rotated several times by depositing and withdrawing from banks or used in the business. The basic idea behind the peak credit theory is to avoid double addition and to bring only the actual income of the assessee where there are large number of unexplained credit and debit entries. In the assessee's case, it is not the case. According to the assessee's admission, the transactions recorded in RCB 1 & 2 are transactions pertaining to its business activity and hence, the peak credit theory advocated by the assessee has been rejected.