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2016 (8) TMI 72

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..... income of the assessee accordingly. The Ld. AO is also directed to eliminate the commission income offered by the assessee in the return of income in view of the directions contained above for determination of income of the assessee for both the assessment years. - Decided in favour of assessee for statistical purposes. - I.T.A Nos. 1377 & 1378/Kol/2012 - - - Dated:- 15-7-2016 - Shri M. Balaganesh, AM Shri S. S. Viswanethra Ravi, JM For The Appellant: Shri K. K. Chhaparia, FCA For The Respondent: Shri A. K. Sinha, JCIT, Sr. DR ORDER Per Shri M. Balaganesh, AM: This appeal by assessee is arising out of order of CIT(A), Central-II, Kolkata vide appeal No. 171/CC-XIII/CIT(A)C-II/11-12 dated 16.07.2012. Assessment was framed by DCIT, C.C-XIII, Kolkata u/s. 153A/143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AYs 2009-10 and 2010-11 vide his order dated 17.10.2011. Since issue is identical in both the years, we dispose of both these appeals by this consolidated order for the sake of convenience. addition in the sum of ₹ 34,50,000/- and ₹ 5,50,000/- could be made towards unexplained cash credit by adopting peak .....

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..... e, the Ld. AO erred in charging interest u/s. 234A, 234B and 234C and/or incorrectly calculating the same. The action of the AO was wholly unreasonable, uncalled for and bad in law. The Ld. CIT(A) was unjustified in confirming the action of the AO. 5. The assessee is proprietor of M/s. Alankita Traders. Brief facts of the case are that pursuant to the search and seizure operation u/s. 132 of the Act conducted on 08.12.2009 in the cases of Shashikant Khetan Group at their business and residential premises, the following bank accounts were found at the time of search: i) The bank A/c No. 605019206 held in the name of M/s. Alankita Traders held with ICICI Bank, 20, R. N. Mukherjee Road, Kolkata; ii) Bank A/c No. 33105144977 held in the name of M/s. Raghupati Enterprises held with Standard Chartered Bank, N. S. Road, Kolkata; iii) Bank A/c. No. 33105139973 held in the name of M/s. Moto Enterprises held with Standard Chartered Bank, N. S. Road Branch, Kolkata and iv) Bank A/c. No. 0206062000000546 held with Dhanlaxmi Bank, 15, Portugese Church, Kolkata are found to be belonging to the assessee. The assessee made a disclosure statement u/s. 132(4) of the Act disclosi .....

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..... Bank N. S. Road Branch Dhanlaxmi Bank 15, Portugese Church 33105139973 - 10,970,000 0206062000000546 - - Total 1,090,000 69,306,103 Commission @ 0.50% 5,450 346,531 In the return filed u/s 153A/143(3) of the Act for the instant year, pursuant to the search operations the assessee voluntarily declared total income of ₹ 1,25,250/- which, inter-alia, included commission income of ₹ 5450/ - referred above. The assessee also included ₹ 3,46,531/ - in the return for AY 2010-11. During the course of assessment proceedings, the assessee voluntarily offered 'additional income' under 'peak credit theory' as he was not able to give details of all undisclosed transactions in the bank account. While submitting a detailed workings assessee voluntarily offered an additional income of ₹ 1,00,000/- under 'peak credit theory for AY 2009- .....

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..... nts. In other words, the transactions in the bank account are in the nature of accommodating entry transactions. I have earned commission income @ 0.50 % of the total cash deposits in the aforesaid account and resultant income has been returned in my returns for AY 2009-10 and AY 2010-11 filed subsequent to search. As regards to the source of cash deposits initially cash was received from the arrangers of the beneficiaries. The cash so received was deposited in the bank accounts maintained by us. Subsequently, I used to issue cheques to some other concerns working in conduit for transfer of funds to ultimate beneficiaries. As regards to cheque deposited, the same were from persons working in conduit for providing accommodation entries. In accommodation entry transactions, it is imperative that the funds move through a number of bank accounts after deposit of cash in a bank account before issuing cheque to the ultimate beneficiaries. Q.4. Please justify the receipt of commission @ 0.50 % on the total cash receipt? Please note that you have substantial cheque deposits too in your bank accounts also. Please justify why you have not offered commission on cheque deposits in your a .....

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..... ked trading transactions, the peak credit theory shall apply on his peak balance in the bank accounts and not on entire cash deposits in the said accounts. Reference may be made to following judgments. (i) ITO Vs. Md. Asraf Ali, ITA No.169/K/2009 order dated 02.07.2010; (ii) Tanmoy Chatterjee Vs. ITO, ITA No. 1434/Kol/2009 order dated 30.07.2010; (iii) Asit Baran Uttasanee Vs. ITO, ITA No.1327/K/2008 order dated 30.04.2010; (iv) ACIT Vs. Praveen Kumar Agarwal, IT(SS)A No. 61 74/Kol/2003; (v) ACIT Vs. Loknath Prasad Gupta, IT(SS)A No. 185 190/Kol/2003; (vi) G. Venkatareddy Co. Vs. DCIT (2002) 124 taxman 261; (vii) S. R. enterprise Vs. ITO (2002) 77 TTJ (Ahd.) 69; (viii) Addl. CIT Vs. Chetan Dass (1975) 99 ITR 46 and (ix) CIT Vs. Neemar Ram Bandhu Ram (1980) 122 ITR 68. As evident from the aforesaid judgments, the principal of peak credit is applicable on peak balance owned by the assessee and the entire deposits cannot be subject matter of additions. 8. The assessee stated before the AO that the initial deposit made in cash for opening the bank account and the bank balance on the date of search totaling to ₹ 5,02,000/- to be treated a .....

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..... rtedly earned by him. However, the same was not believed by the Ld. AO as assessee could not prove with any evidence. We find lot of force in the alternative argument of the assessee that the peak credit should be worked out after considering all the transactions in the undisclosed bank account and the peak credit so arrived should be treated as undisclosed income. We find that the Ld. AO took peak deposit in the bank account acceptable under peak credit theory which, in our opinion, is against the spirit of such theory. It is well settled that the peak credit theory is based on practical way of determining the undisclosed income of a person. We find that the Ld. AO did not dispute that all the deposits in bank accounts were interlinked with withdrawals. We find that the concept of peak credit has been approved in the aforesaid decisions. In our opinion, adoption of peak credit balance after considering all the transactions in the bank account and adding the same as undisclosed income of each year would meet the ends of justice. Accordingly, we deem it fit and proper in the interest of justice and fair play to set aside this issue to the file of the Ld. AO to determine the undisc .....

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