TMI Blog1997 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... g books of account on Diwali year basis. The accounting year for the assessment year 1976-77 ended on November 3, 1975. The petitioner firm returned an income of Rs. 20,960 for the assessment year 1976-77 which was assessed under section 143 of the Income-tax Act, 1961, on the total income of Rs. 24,580 on January 27, 1977. A survey under section 133A of the Act was conducted by the Income-tax Department on August 3, 1979, in the business premises of the petitioner-firm. Several account books comprising Kachi rokar and truck register were detected and were impounded under section 131 of the Income-tax Act, 1961. The impounded record was retained in the possession of the Income-tax Department. Kachi rokar maintained from July 25, 1975, to November 3, 1975, contained various cash credits and exhibited income. Proceedings under section 148 of the Act were initiated on the basis of the impounded record. Notice was served upon Dwarka Das Rathi on March 29, 1980. He submitted a return on February 16, 1982, declaring income at Rs. 20,960. An ex parte assessment under section 144 of the Act was made on March 29, 1982, on an income of Rs. 5,36,580. Such assessment was reopened under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter inclusion of unexplained investment in the shape of cash credits at Rs. 4,58,000 against addition on "peak theory" basis at Rs. 1,42,848. The petitioner relied on the copy of the assessment order dated July 31, 1984, which is annexure-A to the reference application. The petitioner-firm preferred an appeal before the Commissioner of Income-tax (Appeals), jodhpur. The petitioner-firm submitted a statement' regarding peak of cash credits which were worked out by the Assessing Officer at Rs. 1,42,846. A request was made that addition should be sustained at Rs. 1,28,264 against the assessment made at Rs. 4,58,000. The Commissioner of Income-tax (Appeals) held that the peak amount at Rs. 1,28,264 claimed by the appellant was yet to be decided upon by the Assessing Officer. Keeping the facts and circumstances in view, the Commissioner of Income-tax (Appeals) held that it was just and fair if the peak of the said cash credits as appearing in the Kachi rokar was adopted at Rs. 1,42,846 in place of the addition of Rs. 3,58,000 made by the Assessing Officer. He ordered for deletion of Rs. 1 lakh along with consequent reduction. He granted relief of Rs. 3,15,154. A copy of the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee-firm thereafter made a reference application under section 256(1) of the Income-tax Act, 1961, on the following purported questions of law "1. Whether the learned Tribunal was right in law in sustaining addition of Rs. 3,58,000 against the order sustained by the Commissioner of Income-tax (Appeals) at Rs. 1,42,846, which amount was calculated and computed by the Income-tax Officer for purposes of settlement ? 2. Whether, the learned Tribunal was right in law in not sustaining peak credit addition at Rs. 1,42,846 for the reason that the assessment by the Income-tax Officer was under section 144 of the Income-tax Act, 1961 ? 3. Whether the learned Tribunal was right in law in ignoring/distinguishing the decisions cited before it and recorded in para. 9 of the impugned order ? 4. Whether the learned Tribunal was right in observing that in the normal working of a business this modus operandi of introducing one's own money in the shape of cash credit and withdrawing it later on when not required is adopted in the regular books of account, which are produced before the Department in order to show that money was available for making payments for the transactions, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to have been honoured by the parties. It was further submitted that other additions deserved to be telescoped in the sustained addition. It was further submitted by the assessee-firm that the working done by the Assessing Officer of the peak credit amount and the addition affirmed by the Commissioner of Income-tax (Appeals) is in accord with the practice prevalent in the Department and is in accordance with the different decisions of the Supreme Court, our High Court and other High Courts and other Benches of the Tribunal. It was also submitted that the learned Tribunal grossly erred in not following the view expressed by the Supreme Court, the various High Courts and the Tribunals and in. enhancing the addition to Rs. 3,58,000 against Rs. 1,42,846 sustained by the Commissioner of Income-tax (Appeals). It was further submitted that the view expressed by the learned Tribunal, particularly, in para. 10 of the impugned order, is arbitrary, erroneous, unreasonable, illegal and contrary to the law laid down by the Supreme Court and various High Courts. It was lastly submitted by the assessee-petitioner that the petitioner firm was not found with the unexplained assets of the equivale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as repayment to the petitioner himself, which will constitute the requisite source for explaining subsequent borrowings. It was submitted that the Income-tax Appellate Tribunal has passed a common order for the assessment year 1976-77 and the assessment year 1980-81. Even though the facts in respect of both the assessment years were almost identical and ex-parte assessments under section 144 were made in respect of both these years, the Income-tax Appellate Tribunal denied the benefit of the peak credit theory for the assessment year 1976-77 but in respect of the assessment year 1980-81 it was approved. The Income-tax Appellate Tribunal held that making additions in respect of the entire cash credits and not applying the peak credit theory would be like taking a very technical view so far as the assessment year 1980-81 is concerned. It was submitted that such finding of the Tribunal revealed that the Tribunal was giving contrary findings for two different years involving almost identical facts. The adverse findings given by the Income-tax Appellate Tribunal would hardly justify an addition on the ground that the petitioner firm had taken loans from cash creditors who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial additions had been made even in the earlier years. It had also been rightly held by the Tribunal that even during the present assessment, an addition of Rs. 18,117 had been made, which would sufficiently cover any unexplained income to the extent of Rs. 16,950. The amount of Rs. 16,950 could not, therefore, be added as income from undisclosed sources. The Division Bench quoted the decision of the Madras High Court in CIT v. Guruswamy Nadar and Sons (K. S. M.) [1984] 149 ITR 127, where it was held that when there are two separate additions, one on account of suppression of profit and another on account of cash credit, it is open to the assessee to explain that the suppressed profits had been brought in as cash credits and one has to be telescoped into the other resulting only ill one addition. It was thus held that the Tribunal was right in its view in telescoping the additions made towards the cash credits. In the case of Addl. CIT v. Dharamdas Agarwal [1983] 144 ITR 143 (MP), it was held that when cash credits were treated as income from undisclosed sources, the assessee can take an alternative contention before the Appellate Assistant Commissioner that the cash credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before us several judgments of different High Courts and one judgment of the Supreme Court in support of his contention. In CIT v. Banswara Textiles Mills Ltd. [1999] 235 ITR 743 (Raj) (Appex.)-D. B. Income-tax Reference Application No. 6 of 1995, a Division Bench of our court comprising B. R. Arora and P. C. Jain JJ. by their judgment dated January 17, 1996, held that whether the addition of an amount made by the assessing authority out of a larger amount of total addition as made by the initial taxing authority was proper or not or how such addition is to be made is purely a question of fact, which could be only decided on the basis of the materials available on record. Unless the findings of fact arrived at by the Commissioner of Income-tax (Appeals) and the Tribunal are based on misapplication of any rule of law or are based on no evidence or the authority had ignored material evidence, such finding cannot be taken as perverse and these findings do not raise any question of law to be referred to the High Court. In CIT v. Precision Finance Pvt. Ltd.[1994] 208 ITR 465, a Division Bench of the Calcutta High Court held that it is for the assessee to prove the identity of the cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned on the date mentioned. If there was no evidence to show that the loan was actually given and there was no evidence to show that the amount was lying uninvested with the lady who advanced the loan, it was held that the conclusion of the Tribunal was not perverse in law. In S. L. Ganeriwal v. CIT [1991] 192 ITR 347 (Raj), a Division Bench of the Rajasthan High Court held that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, it is for the assessee to furnish an explanation in respect of any sum found credited in his books of account and after considering the same, the assessing authority could come to the opinion as to whether the explanation is, satisfactory or not. The question whether any cash credit is genuine or not is basically a question of fact. We cannot accept as a broad proposition of law the view expressed by the Madhya Pradesh High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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