TMI Blog2016 (8) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 to the date of filing of return u/s 153A of the Act. It is due to the fact that in the returns of income, the assessee had clearly made a request to adjust the seized amount towards the liability of self assessment tax. Once the return is filed, any tax due on account of income disclosed is amounting to existing tax liability and the department is bound to adjust the seized cash towards the existing tax liability of the assessee to the extent of liability of self assessment tax. Therefore, the A.O. is not correct on charging interest on total income assessed up to the date of assessment. The CIT(A) after considering the relevant facts directed the A.O. to charge the interest on returned income, up to the date of filing return of income in response to notice u/s 153A after adjusting the seized cash, and wherever there is a tax liability on account of additions made to assessed income, the interest is to be charged up to the date of assessment. We do not see any error or infirmity in the order passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 one Mr. M. Harinath who was the cashier of the assessee. On examination, Mr. M. Harinath confessed that the said cash was belonged to his employer Shri Dhanekula Rama Rao. When the said statement was confronted to the assessee, the assessee admitted that the cash found from the possession of Shri M. Harinath belongs to him and stated that cash represents closure proceeds of certain recurring deposits kept in various branches of SGB. The assessee further agreed that he would disclose the cash found in the possession of his employee along with earlier disclosure of Rs. 11,40,00,000/- as undisclosed income for the period from 2004-05 to 2009-10. 3. Consequent to search proceedings u/s 132(4) of the Act, the assessee s case has been notified to Central Circle, Vijayawada. Thereafter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the statement recorded during the course of search proceedings. The assessee further submitted that the net peak credit for the year should be worked out by taking into the inter branch transfers of deposits. However, you have taken the branch wise net peak credit without telescoping the inter branch transfers between the 4 branches of SGB. It was further submitted that though the bank managers admitted that there are few more deposits which belong to me, the branch managers have failed to establish that those deposits are belonging to me. Therefore, the net peak credit worked out by you based on the statement given by the bank managers without any seized materials is not correct. The assessee further submitted that while arriving at the peak credit, you are failed to consider the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 inter branch telescoping for recurring deposits of SGB though rightly claimed by the assessee. The A.O. failed to follow the normal practice of allowing the inter branch telescoping inspite of the fact that he gave many direct instances of inter branch fund transfers in respect of these deposits particulars, in respect of deposits in Governorpet and Patamata branches. The A.O. relied upon the statement given by the bank managers, however, in the same statements, the bank managers clearly stated that there are instances of inter branch transfers of funds between one branch to another branch. 8. The assessee further submitted that during the course of search, he has worked out the net peak deposits for all the years by taking into account the inter branch transfers of funds wherever the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arrive at the undisclosed income for each year. Such method of working peak credit does not give a correct picture of working of peak credit, as the assessee is one person and all the deposits have been held as belonging to him. The CIT(A) further held that working out peak credit for each branch independently without allowing telescoping benefit of inter branch transfers is not correct. Unless the cash balance of closure proceeds of accounts are utilized by the assessee elsewhere, the credit for available cash balance in a particular period should be telescoped against the further deposits either maintained at same branch or other branches. The A.O. failed to bring on record any evidences to say that the funds available with the assessee have been invested elsewhere. The question of unexpla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 that the CIT(A) is erred in directing the A.O. to work out peak credit and interest income after telescoping the inter branch transfer of R.Ds. The A.O. has rightly worked out the branchwise peak credit as the assessee s modus operandi of operating the recurring deposit account clearly established that he never transfers funds between one branches to another branch. The bank managers have stated in their statement recorded during the course of assessment proceedings that in all the instances, the closure proceeds of recurring deposits accounts have either been paid in cash or credited to savings bank account. Nowhere the fund has been adjusted against instalments of another recurring deposit account or transferred between one branchs to another branch. The D.R. further submitted that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of single operator and common pool of funds, the possibility of transfer of funds between one branch to another branch is quite possible. The branch managers in their statement given before the A.O. accepted that the assessee has transferred funds between one branch to another branch to repay the instalment of recurring deposit accounts. As pointed out by the Ld. CIT(A) all the branches are located in a same place and which can be reached in a same day. Therefore, working of branch wise peak credit without allowing telescoping of inter branch transfers is not correct. The CIT(A) after considering the details furnished by the assessee directed the A.O. to allow the telescoping benefit for inter branch transfers of funds. The relevant findings of the CIT(A) are reproduced as under: 07.0 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, it is very difficult to isolate certain RD accounts as not belonging to the assessee when there is alive link between those deposits vis- -vis deposits identified as belonging to the assessee and admitted by the assessee. There cannot be isolated ownership of the deposits when all these deposits are inter-connected and inter-woven and having a common pool of funds. Branch Managers as public functionaries would not have stated these deposits are also belonging to the assessee without having knowledge of ownership of these deposits. Due to their constant and regular relations with the appellant, the managers are well aware of the owners of the deposits. Being a grameena bank, very few instances of such high net worth deposits are held in such branches. They are not a regular commercial b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 balances elsewhere. At least to that extent, no evidences have been brought on record to suggest that the assessee had invested such cash balances in other properties or incurred some expenditure so that no benefit of such cash can be allowed in the hands of the assessee for the purpose of investment in RD accounts at other branches. The question of unexplained investment comes into play only when assessee has no money to explain. There is no dispute about the cash availability in the hands of appellant, which represents proceeds of RD accounts. The dispute is arising for telescoping of such cash to the investments in deposits of other branches. All the branches are located at very reachable distances and it is not the case that they are located in different towns and stations and a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 under. Asst. Year Gross peak Net peak Income offered as per I.T. Return 2004-05 2,58,00,000 2,58,00,000 1,38,00,000 2005-06 7,42,80,000 4,84,80,000 Nil 2006-07 8,15,07,992 72,27,992 1137,00,000 2007-08 10,41,71,949 2,26,63,957 Nil 2008-09 15,04,47,390 4,62,75,441 3,10,00,000 2009-10 14,50,78,767 Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 to the date of filing of return u/s 153A of the Act. It is due to the fact that in the returns of income, the assessee had clearly made a request to adjust the seized amount towards the liability of self assessment tax. Once the return is filed, any tax due on account of income disclosed is amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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