TMI Blog1993 (3) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... residence of the assessee is a Cool Foam Diary of 1973 in which entries were found in assessee's own handwriting. Although the diary is for the year 1973, entries have been made for the year 1981 onwards. But they are not seriatim entries, nor in a chronological order. We are concerned in these appeals before us with regard to a particular sheet of paper which is as follows: N/Acted (Rs.) 25.1.1984 A.M. 5,00,000 21.11.1984 K.S.P. 1,25,000 19.12.1984 K.C. Markose 80,000 21.12.1984 Sea Pearl Kutty Moosa 1,50,000 24.8.1981 K.K.B. 1,00,000 2.3.1983 Rash 3,11,380 Tranvancore Investments (P.S. Sathyan) FDR One bus M.P.C. 40,000 -do- -do- 40,000 -do- -do- 50,000 The entry against 2nd March, 1983 is not clear whether it refers to 'Rash' or Rasheed' or 'R. Ramesh Kumar'. The Asstt. Director of Inspection (IW), Cochin, examined the assessee on 12th Aug., 1985 with regard to the above entries in the diary and the questions and replies thereto are as follows: "N. Acted means not accounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sha's, Cherpu, Kadavanthara, Cochin-20 Q.5. What is your connections with Ramesh Kumar? A. Mr. Ramesh Kumar is a subscriber in many chitties of our firm. Q.6. Have you given this amount to Ramesh Kumar or have you received this amount from him. A. I have received it from Ramesh Kumar. Q.7. Have you received it for interest? A. On 12 per cent interest. Q.8. When you have returned this amount? A. On various occasions. I don't remember exactly. Q.9. What is Ramesh Kumar's business? A. He is a glass merchant at Tripunithura. Q.10. Why you have told Asstt. Director of Inspection that Rush means Rasheed? A. I have told Asstt. Director of Inspection that I don't remember exactly and said I think stands for Rasheed. Thus, in the initial statement the assessee referred to the impugned entry as referring to Rasheed. In the subsequent statement he referred to the amount as having come from Ramesh Kumar. He had also explained in his letter dt. 30th Dec., 1986 addressed to the ITO that "in this connection I may submit that I have filed my IT returns for the asst. yr. 1983-84 on 31st March, 1986 in which I have returned 'income from other source' Rs. 3,25,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee appealed against the addition of the income at Rs. 5,61,421. It was contended that the income admitted by the assessee in his return under other sources in a sum of Rs. 3,25,000 would cover the unaccounted education expenses of the children, household expenses and the peak of the bank deposits in the names of the assessee and others. As regards the sum of Rs. 3,11,380 it was contended that it was not a loan given by the assessee but rather a deposit received by him and as he was not in a position to prove the source, he had taken this amount into account while finalising the figure of Rs. 3,25,000. Further, it was contended that the ITO in arriving at the peak credit with regard to the bank deposits in the name of the assessee, his wife and children, erred in individually working out the peak credit in each of such accounts and if all the deposits standing in the name of the assessee, his wife and children are lumped together and peak is worked out, it would come to Rs. 1,06,000 as against Rs. 1,58,400 determined by the ITO. The CIT(A) on a consideration of the submissions made before him and the materials on "record, held that the assessee had been maintaining all along that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated that the entries found therein represented advances/deposits. At that stage of the examination or at any time in the course of the said examination, no question would appear to have been put to the assessee to identify such of those items which represented advances and such of those items which represented deposits. From the statement it is seen that the assessee had explained the term 'Rash' as "I think stands for Rasheed" who was a subscriber to our chitties". From this the Department has gained the impression that the transaction is a deposit. This is confirmed in the letter of the ITO dt. 15th Dec., 1986 that "that you have deposed before the Asstt. Director of Inspection, Ernakulam, that "Rash" represents Rasheed and the amount of Rs. 3,11,380 is a deposit for a loan from this person on the date noted against the amount. However, when your sworn statement has been recorded by me you have changed the earlier version and stated that "Rash" represents A. Ramesh Kumar, Ushas, Kadvanthara and the amount is a deposit received from the person". From the above, it is evident that the Department itself has understood the. transaction only in the nature of a deposit received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an advance given by the assessee to some unknown person. We concur with his findings. 7. Sri C. Abraham, the learned senior Departmental Representative submitted that if the impugned amount is held to be a deposit, the Revenue will be having no case. We agree with his submission and hold that the impugned amount was rightly considered as a deposit received and the inclusion of the sum of Rs. 3,11,380 as advance is not warranted in the facts of the case. The same was rightly deleted by the CIT(A). Therefore, the addition of Rs. 30,000 as notional interest earned on such sum was also rightly deleted. 8. Another related aspect is with regard to the computation of the peak credit. The ITO had compartmentalised the various deposit accounts standing in the name of the assessee, his wife and children and computed the peak credit in each such account so as to arrive at the peak credit of Rs. 1,54,400. When the deposits and bank accounts of the assessee and others are taken together for assessment, the proper method would be to have a comprehensive review of all the transactions in a chronological order cancelling the effect of "transfer to" and "transfer from" each of such accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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