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2015 (9) TMI 441 - ITAT PUNE

2015 (9) TMI 441 - ITAT PUNE - TMI - Addition on account of peak credit/investment - whether the addition is duly covered in the declaration and other addition made by the Assessing Officer in the assessment order and this sustaining amounts to taxing the same amount twice? - Held that:- Since nothing has been brought before the lower authorities as well as before us that the statement given during the course of search was on wrong assumption of facts or that the statement given during the cours .....

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the AO on the basis of the admission of the assessee during the course of search being peak investment in unrecorded transactions in purchases and sales. - Decided partly in favour of assessee.

Addition of ₹ 1 lakh on adhoc basis out of various expenses as were not fully verifiable with supporting vouchers - Held that:- No infirmity in the above disallowance since the assessee himself by agreeing for addition of ₹ 1 lakh prevented the AO from making further enquiries. The .....

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of the CIT(A) is upheld - Decided against assessee. - ITA No.589/PN/2014 - Dated:- 26-8-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. For The Assessee Shri S.N. Doshi For The Department Shri.Hitendra Ninave ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 29-01-2014 of the CIT(A) Central, Pune relating to Assessment Year 2007-08. 2. Ground of appeal No.1 by the assessee reads as under : On the facts and circumstances of case the Ld.CIT(A) has .....

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he I.T. Act in the case of Bhattad group was carried out on 16-11-2006 at Solapur. The assessee was also covered under the warrant of authorization executed on 16-11-2006. In response to notice u/s.153A dated 30-11-2007, the assessee furnished the return of income on 28-12-2007 declaring total income of ₹ 99,25,712/-. The return was accompanied with the statement showing computation of income, trading, profit and loss account, capital account, tax audit report and other annexures. 4. The A .....

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- to the total income as undisclosed income of the assessee. 5. The AO similarly noted that during the course of survey conducted u/s.133A of the I.T. Act in the case of M/s. Sairam Trading Company stock inventories were prepared. A tentative trading account was also prepared according to which excess stock of ₹ 1,44,663/-was found. The AO confronted the assessee regarding the same. Rejecting the explanation of the assessee that the difference was due to method of valuation adopted by the .....

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on these papers. In the statement of Shri Mukund Bankatlal Bhattad recorded during the course of search action on 17-11-2006 the AO noted that the assessee in his reply to question No.20 & 21 had stated that the income on purchases and sales on pages 68 to 78 and pages 78 to 88 as well as pages 1 to 22 are credit purchases and credit sales which are not accounted in the books of account. He noted that in reply to Question No.26 the assessee had stated that approximately an amount of ₹ .....

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/An. A/Inv.No.06/Pages 1 to 7 was seized as Bundle No.6. These pages reflect the unrecorded credit sales made by Shri Satnarayanan and Shri Raja Koli who are assessee s salesmen. As per the list the total amount yet to be collected out of these sales represented by entries not rounded off in the case of Shri Raja Koli was ₹ 8,03,732/-and that of Shri Satyanarayan was ₹ 10,08,141/-. These amounts were receivable on the date of search. The assessee in reply to Question No.22 recorded d .....

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amount of ₹ 28 lakhs should not be added to his total income which was declared by him as peak investment in the unaccounted transactions. The assessee in his reply submitted as under : Peak Credit we draw your kind attention to answer to Q. No. 26, wherein it is clearly slated that circulating capital was ₹ 25 to 30 Lakhs and loosely termed as peak credit and also offered for taxation. It may please he noted that, this does not constitute the undeclared income because cash on hand .....

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m undeclared capital in the form of cash rotated or circulated in the business or cash on hand on the date of search which is higher. Accordingly in this case, assessee has already offered cash on hand for taxation, therefore taxation of peak credit does not arise. During the course of search the assessee was not in a position to visualize the impact of peak credit on declaration on account of panic condition, therefore, the declaration was not appropriate or correct. It may please be noted that .....

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naccounted business and the unaccounted cash found. According to him, the proceeds out of the unaccounted sales when received in cash need not necessarily remain with the assessee in cash. The unaccounted business was not a single transaction affair. There was continuous purchase and sales in this business. It is therefore only reasonable to presume that the sale consideration would have been reinvested in the unaccounted business towards fresh purchases. Since the transactions are unrecorded as .....

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of such undisclosed income made in the business or anywhere else nor the search party found any other undisclosed asset, expenditure etc., which should be linked to the peak credit disclosed. It was argued that the declaration u/s.132(4) is not sufficient for making the addition to income. It was argued that the peak credit investment is circulating capital having role over effect which goes on changing its nature from time to time. Having been brought in cash it is converted into stock and subs .....

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CIT(A) was not satisfied with the arguments advanced by the assessee. He observed that the addition was made by the AO based on the assessee s own statement duly substantiated by seized documents. Relying on various decisions he noted that the statement recorded u/s.132(4) has great evidentiary value. He noted that admission by a person is a good piece of evidence because the person making a statement stops the opposite party from making further investigation. A statement recorded u/s.132(4) of .....

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, to stocks, sundry debtors, assets or expenditure. However, in absence of any concrete evidence to show that the statement given during the course of statement recorded u/s.132(4) is incorrect, the same cannot be accepted. Distinguishing the various decisions cited before him the Ld.CIT(A) upheld the addition made by the AO. 12. Aggrieved with such order of the CIT(A) the Assessee is in appeal before us. 13. The Ld. Counsel for the assessee strongly opposed the order of the CIT(A). He submitted .....

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n account of peak investment in unaccounted sales and purchases would be ₹ 17,23,824/-. He submitted that even the above peak investment of ₹ 17,23,824/-cannot be added since the assessee has already offered cash of ₹ 45,00,484/- and has not disputed the same. It is this cash only which was utilized in effecting unaccounted sales and purchases as were recorded in the loose papers. He submitted that in case where there is an involvement in peak cash of ₹ 28 lakhs in unacco .....

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9/-, unaccounted stock of ₹ 1,44,663/- and sundry debtors of ₹ 10,08,141/-, therefore, further addition of ₹ 28 lakhs will amount to double addition of the same amount and therefore the same should be deleted. He also relied on the decision of the Mumbai Bench of the Tribunal in the case of Shri Arvind M. Kariya Vs. ACIT vide ITA No.7024/Mum/2010 order dated 30-01-2013. 14. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submi .....

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o no valid retraction after offering the additional income of ₹ 28 lakhs on account of peak investment in the unaccounted transactions. He accordingly submitted that the order of the CIT(A) be confirmed and the ground raised by the assessee be dismissed. 15. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us .....

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We find the AO made addition of ₹ 28 lakhs since the same was not declared by the assessee in the return filed in response to notice u/s.153A although the assessee has declared the cash found during the course of search and the unrecorded sundry debtors and a part of the unaccounted stock in the return of income. We find the CIT(A) confirmed the addition of ₹ 28 lakhs made by the AO on the ground that the assessee could not substantiate with concrete evidence to show that the statem .....

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y debtors is ₹ 10,76,176/- on account of unexplained sundry debtors, therefore, the amount of ₹ 28 lakhs declared during the course of search being the peak investment in the unaccounted purchases and sales is already included in the said amount and therefore the addition of the same will amount to double taxation. We do not find any force in the above argument of the Ld. Counsel for the assessee. The assessee was engaged in both accounted and unaccounted business. The assessee durin .....

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sessee that an amount of ₹ 28 lakhs is already included in the cash found during the course of search at ₹ 45,05,779/- and the unaccounted debtors at ₹ 19,76,176/- cannot be accepted. However, we find some force in the submission of the Ld. Counsel for the assessee that the entire amount of ₹ 28 lakhs cannot be added to the total income of the assessee. We find the assessee during the course of search has admitted unrecorded credit sales made by Shri Satnarayanan and Shri .....

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unt of ₹ 10,76,176/- out of the surrender of ₹ 18,11,873/- declared by assessee on account of unrecorded sundry debtors forms a part of the peak investment of ₹ 28 lakhs in the unaccounted business and therefore the addition of the above amount will amount to double taxation. We therefore are of the considered opinion that out of the addition made by the AO at ₹ 28 lakhs which has been upheld by the CIT(A) only an amount of ₹ 17,23,824/- only can be sustained. 16. I .....

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n various decisions that admission by a person is a good piece of evidence because the person making a statement stops the opposite party from making further investigation. A statement recorded u/s.132(4)of the I.T. Act stands on an even stronger footing. Since nothing has been brought before the lower authorities as well as before us that the statement given during the course of search was on wrong assumption of facts or that the statement given during the course of search is untrue or false, t .....

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sion of the assessee during the course of search being peak investment in unrecorded transactions in purchases and sales. 17. So far as the decision relied on by the Ld. Counsel for the assessee is concerned in the case of Shri Arvind M. kariya (Supra), the same in our opinion is distinguishable and not applicable to the facts of the present case. In that case, the assessee was engaged in share transactions alleged to be penny stock companies where fraudulent transactions have taken place in con .....

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see is accordingly partly allowed. 18. Ground of appeal No.2 by the assessee reads as under : On the facts and circumstances of case the Ld.CIT(A) has erred in sustaining the adhoc addition ofRs.1,00,000/only relying upon the admission made by the appellant. 19. After hearing both the sides we find the AO made addition of ₹ 1 lakh on adhoc basis out of various expenses on the ground that the same were not fully verifiable with supporting vouchers for which the assessee himself has agreed f .....

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