9911796707
Advanced Search 
TMI Blog2016 (8) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 132(1) of the Act was conducted in the residential and business premises of the assessee on 22.11.2008. During the course of search proceedings, a document was seized vide annexure - DRR/A/1 which contain a list of 37 names grouped into 4 branches of the Saptagiri Grameena Bank (SGB) against which certain figures have been mentioned and the aggregate of such figure was at Rs. 11.40 crores. During the course of search proceedings, in response to statement recorded u/s 132(4) of the Act on 22.11.2008, the assessee stated that the above list represents his unaccounted income earned from real estate business, deposited in benami recurring deposit accounts in various branches of SGB. The assessee further stated that he had earned the said unaccounted income from the real estate business in his individual capacity and the said sum was deposited in various names as contained in the said document in 4 branches of SGB and agreed to disclose undisclosed income of Rs. 11.40 crores for various assessment years from 2004-05 to 2009-10. During the course of search on 22.11.2008, the department has found cash amounting to Rs. 4,34,00,000/- from the residential premises of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent u/s 132(4) of the Act. Therefore, issued summons to the respective branch managers and recorded their statement. The branch manager of the concerned branches have deposed before the A.O. and admitted that the assessee has operated various benami recurring deposit accounts and furnished list of such recurring deposit accounts including closed accounts. The A.O., based on such information has listed out branchwise and yearwise R.D. accounts and worked out the net peak credit of deposits in a year and aggregated the sum for all the branches and reworked the net peak credit for all the years. With these observations, issued a show cause notice and asked to explain why the peak credit worked out as per the details furnished by the branch managers shall not be adopted as undisclosed income for the period. 5. In response to show cause notice, the assessee submitted that the net peak credit arrived by you based on the statements of the bank managers is totally incorrect. The assessee further submitted that he has worked out the net peak credit by taking into account inter branch transfers between all the branches and as per which the net peak credit works out to the income declared in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g deposits. The A.O. further held that the assessee has not proved denial of 4 recurring deposits at Patamata branch and also Vellaturu branch of SGB. The material gathered by the department indicates that these deposits are belonging to the assessee. With these observations made additions to the income towards 4 denied deposits. While doing so, the A.O. has relied upon the ratios of the decision of Hon'ble Supreme Court of India in the case of CIT Vs. Durga Prasad More (1917) 82 ITR 540 (SC) and Sumati Dayal Vs. CIT (1994) 214 ITR 801. 7. Aggrieved by the assessment orders, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee further submitted that the A.O. has erred in facts in adding alleged R.D. deposits when the assessee has specifically denied those deposits which are not belonging to him. The A.O. erred in stating that except disowning the benami deposits, the assessee could not produce the details of real owners of accounts, nor produced any evidence to show that those deposits are not belonging to him. The assessee further submitted that the A.O. erred in not giving the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it should have been treated as advance tax payment and hence should have levied interest only up to the date of search. 9. The CIT(A) after considering the submissions of the assessee held that the assessee has failed to prove with any evidences that the denied deposits are not belonging to him. The assessing officer, on the other hand narrated a number of instances where nexus between the owned up deposits with denied deposits of all these branches. Therefore, the direct nexus among these deposits held at various branches has established in clear terms. The CIT(A) further held that the bank managers while deposing before the A.O. have clearly accepted that those denied deposits are belonging to the assessee. With these observations, held that the action of the A.O. in taxing the denied deposits held at Vellaturu branch as well as other branches belong to the assessee for all the years is upheld. As regards the working of peak credit, the CIT(A) held that it is a fact that there are a number inter branch transfers among these branches along with cash payments and receipts out of these accounts are made out by the assessee. The A.O. worked out the peak credit of each branch to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. It is due to the fact that in the return of income the assessee had clearly made a request to adjust the seized amount towards the liability of self assessment tax. Once return is filed, any tax due on account of the income disclosed is amounting to existing tax liability and the department is bound to adjust the seized asset towards the existing liability of the assessee to the extent of liability by self assessment tax only. Therefore, it is not correct on the part of the A.O. to charge interest up to the date of assessment without adjusting the seized amount. Since the department has seized cash during the course of search, it is bound to adjust the seized cash available with the department to the self assessment tax and then calculate interest. Accordingly, the A.O. is directed to rework the levy of interest u/s 234B of the Act up to the date of filing of the return, wherever there was a liability on account of self assessment tax and up to the date of assessment wherever demand is raised by making additions to returned income for all the years under appeal. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 11. The Ld. D.R. submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials available on record and gone through the orders of the authorities below. The A.O. worked out the branch wise net peak credit of recurring deposits and the aggregate total peak credit of all the branches has been considered as undisclosed income of the assessee for the relevant period. The A.O. was of the opinion that the modus operandi followed by the assessee clearly establishes that there are no funds transferred between one branches to another branch. Therefore, working out branch wise peak credit gives clear picture of undisclosed income of each year. It is the contention of the assessee that he has operated recurring deposit accounts in 5 branches of same bank and in many cases the fund has been transferred between one branch to another branch. It is further contended that the branch managers in the statement given before the A.O. has clearly accepted that there are instances of transfer of funds between one branch to another branch. Therefore, the A.O. was not correct in working out the net peak of each branch independently without allowing the telescoping benefit of inter branch transfers. We find force in the arguments of the assessee for the reason that in a case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese deposits are also belonging to the assessee as held in other branches. On the other hand, the appellant argued that there is no evidence to suggest that these deposits are belonging to the assessee and assessee cannot be penalized on the basis of the sworn statement of the managers of those branches which serves their purpose only. Being a public sector bank, it is totally illogical to hold the view that all the big deposits are belonging to the assessee only and no other person deposited or opened deposit account in such branches. 08.0 After careful consideration of the submissions of the AO as well as appellant and also on perusal of the facts, I am of the view that these denied RD accounts held at various branches of Saptagiri Grameena Bank are also belonging to the assessee as there are number of inter-branch transactions which includes to and from these denied deposits to owned up deposits and vice versa. The Assessing Officer has narrated a number of instances where nexus between the owned up deposits with denied deposits of all these branches. Therefore, the direct nexus among these deposits held at various branches (5) has been established in clear terms. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts maintained at other branches. This act of AG gives a distorted picture of the financial affairs of the assessee. When assessee is having sufficient cash in his hand which represents proceeds of some of the RD accounts, which is an admitted fact, the same assessee cannot be fastened with tax liability on account of unexplained investment in other accounts. Such treatment defies logic. Peak credit has to be worked out by taking the assessee as one person though the accounts are held in the names of different persons, Moreover, all the 5 branches of the bank are located at nearby stations; therefore, the cash balances on account of maturity of some accounts have to be allowed in the hands of the assessee having been utilized for depositing in the accounts of other branches. Working out peak credit for each branch independently is not correct on the part of the Assessing Officer. Unless the cash balances out of closure of accounts are utilized by the assessee elsewhere, the credit for such balances has to be given for the purpose of investing in other RD accounts either maintained at the same branch or at other branches. It is not the case that the assessee has invested these cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iterates the fact of common ownership of all these accounts maintained at various branches located, at Vijayawada and nearby stations. The branch manager also confirmed that the inter branch transfers are prevalent in their bank also. Assessee being one person having owned up all deposits held in various names and invested in those accounts by a common pool of finance, it is rational and prudent to allow net peak credit by considering all deposits including denied deposits held in all 5 branches. Thereafter the difference of such net peak credit with that of income disclosed by the assessee should be treated as unaccounted income invested in those deposits for each assessment year. In the course of appellate proceedings, the Authorized Representative has stated that if peak is adopted by considering all branches, the appellant has no objection to treat the denied accounts also as belonging to him. 11.0 In view of the above discussion, in the course of appellate proceedings, the AR of the appellant has been asked to prepare peak credits after taking into account all deposits for each assessment year. Accordingly, the AR of the appellant prepared the same and filed which is as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The assessee had requested the department to adjust the seized funds towards tax liabilities of the assessee for the above assessment years. Therefore, charging of interest without adjusting the seized cash is unjustified when the funds of the assessee are already with the department and the assessee had not enjoyed these funds from the date of search. We find force in the arguments of the assessee for the reason that as per the provisions of section 132B of the Act, the seized assets are to be adjusted towards any existing tax liability under the direct taxes and towards any liability that arises on completion of assessment etc. In the present case on hand, on perusal of the documents available on record, we find that at the time of search the department has seized about Rs. 15.99 crores. The assessee has made several requests even before the investigation department towards adjustment of seized cash towards the tax liability aroused on account of filing of revised returns u/s 153A of the Act. The A.O. without adjusting the seized cash computed the interest up to the date of assessment. As per the provisions of section 234B of the Act, interest is required to be charged up t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
