TMI Blog2018 (9) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... could satisfactorily explain the genuineness and other necessary ingredients needed under Section 68 with respect to the balance except inability to co-relate the cheque or instruments with the creditor concerned. Given that on these aspects, the findings were in favour of the assessee (which do not appear to have been interfered with), the revenue’s appeal can only succeed in part. It is held that the revenue’s appeal has to succeed in part; the amount of ₹ 3,99,35,142/- in the account of the assessee can be taxed under Section 68 of the Act. The appeal is allowed to this extent. - ITA 544/2005 - - - Dated:- 12-9-2018 - MR. S. RAVINDRA BHAT AND MR. A.K. CHAWLA JJ. Appellant Through: Mr. Raghavendra Singh, Advocate. Respondents Through: Sh. M.P. Rastogi, Sh. K.N. Ahuja and Sh. Manu Giri, Advocates. MR. S. RAVINDRA BHAT 1. The question of law, framed in this appeal by the revenue under Section 260A of the Income Tax Act, 1961 ( the Act hereafter) is: Whether the order passed by the ITAT to the extent the same deletes the additions made by the assessing officer suffers from perversity? 2. The facts necessary to decide the case are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond issue, it was contended that the ITAT fell into error in holding that the addition under Section 68 was unwarranted. Counsel urged that there is no anomaly in bringing to tax amounts on one or other head of income and also, additionally holding that Section 68 applied. Mr. Raghavendra Singh, learned counsel for the revenue, relied on Kale Khan Mohammad Hanif v. Commissioner Of Income-Tax (1963) 50 ITR 1 (SC) in this regard. It was submitted that the assessment record shows that the feeder accounts were opened either in the name of employees or in the name of persons who give their names for consideration and operate at the instruction of Mr. Ashok Gupta. Moreover, these persons have completely denied of having any knowledge of transactions in such bank accounts. 5. Counsel pointed out the findings of the lower revenue authorities; it was submitted that under section 68, when a cash credit entry appeared in the assessee's books of accounts, the assessee was under an obligation to explain it to the satisfaction of the AO. In absence of such satisfactory explanation or failure to tender evidence, the AO could hold that income was income from undisclosed sources. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and and any addition, if required, is to be made only in those accounts where the appellant has no business connection. Reliance was also placed on the block assessment of Mr. Manoj Aggarwal where no such addition was made. 7.4 I have gone through the submissions made by the appellant. The assessment record shows that the feeder accounts were opened either in the name of employees or in the name of persons who land their names for consideration and operated at the instruction of Mr. Ashok Gupta. Moreover, these persons have completely denied of having any knowledge of transactions in such bank accounts. 7.5 Regarding bank statement cannot be treated as books of accounts; the appellant's contention is not maintainable on the ground that the alleged accounts books and annual accounts showing such entries are also made on the basis of these bank accounts. XXXXXX XXXXXX XXXXXX 7.7 The issue is to be decided is whether the addition under Section 68 had rightly been made or not. As per section 68, when a cash credit entry appears in the appellant's books of accounts, the appellant is under legal obligation to explain the same that too to the satisfaction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it received cash from its clients and gave them cheques of profit or loss in share dealings to give genuine colour from fictitious transactions. Thus when case of the assessee has been accepted and total turnover taken at more that ₹ 104 crores for computing income from transactions, we see no justification for not accepting case relating to credit of less than ₹ 8 Crores in the accounts of the assessee. On facts of the case above credits cannot be treated as unexplained. These are part and parcel of total credits of ₹ 104 crores duly accepted by the revenue for computing assessee's commission income. Besides cash received from the clients was credited in various bank accounts described as main/ feeder / fictitious accounts maintained by the assessee in the names of his employees like Surinder Rawat etc. Admittedly from the above account cash was brought to the bank account of the assessee. Therefore, as far as credit entries in the bank account of the assessee are concerned, these are explained with reference to the cash available in the main or feeder accounts. The addition for unaccounted cash is made, if any, in the feeder/main accounts which have been tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,575 in respect of the year 1947-48, as he was unable to accept the explanation offered by the assessee in support of his contention that the credit entries did not represent income. The Supreme Court dealt with the assessee s submission that the amount brought to tax as undisclosed could have been, since income was previously assessed on percentage basis. The Court held as follows: We have now to deal with the last question, question No.6, which, as framed in the case for the assessment year 1945-46, is set out below : Whether having regard to the fact that the Income-tax Officer has assessed the income on a percentage basis, he was justified in treating the said sums of ₹ 41,300 and ₹ 11,000 as profits from an undisclosed source ? In the case for the assessment year 1947-48 the corresponding question was in identical terms except that the figures mentioned in it were ₹ 19,575 and ₹ 20,000. The High Court answered the question in the affirmative, and in our view rightly, for we do not think that any other answer is possible. We are in some difficulty in appreciating the point of this question also. The question would seem to suggest that be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entage basis. That is why we think that the answer to the question as framed must be in the affirmative. As we have earlier said, the question as to the source from which a particular income is derived has to be decided on all the facts of the case. In the present case, the Income-tax Officer held the income represented by the credit entries to be income from undisclosed sources, that is, neither from the manihari (general merchandise) nor from the bidi business of the assessee which he had disclosed. This view was upheld by the Appellate Commissioner and by the Tribunal excepting as to two of the amounts earlier mentioned. It was open to the assessee to raise the question that the finding that those amounts were income received from undisclosed sources was not based on any evidence or was, for other reasons, perverse. It appears that he did raise some questions of this type before the Tribunal for reference to the High Court but the Tribunal did not think that those questions legitimately arose and did not refer them to the High Court. The assessee accepted the decision of the Tribunal and did not move the High Court to direct a reference in regard to those questions under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty like its certificate of incorporation, PAN number, income tax returns, bank accounts, names and addresses of the directors and so on, the Courts have insisted on the AO to make a proper enquiry to examine the identity and creditworthiness of such companies and the genuineness of the transactions in question. Where the AO fails to make such an enquiry, a Court might delete the additions made by the AO. 15. The present case, however, is of a different nature. Here, we are dealing with an Assessee who does not deny that he is an accommodation entry provider. He, in fact, makes no bones of the fact that he either owned or floated 'paper companies' only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. 16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file. 11. This court observes that the lower authorities found from the assessment records that the feeder accounts were opened either in the name of the assessee s employees or in the name of those who operated for consideration and operated at the instruction of Mr. Ashok Gupta, proprietor of the assessee. These individuals denied of having any knowledge of transactions in those bank accounts. The AO, in these circumstances felt that the bank statements were reliable because entries in the books (found during the search) reflecting the amounts, supported in the bank account statements seized. Having regard to Kale Khan (supra) and D.K. Garg (supra) , it is held that per se the ITAT could have not ruled out taxability under Section 68, given the unsatisfactory nature of the explanation provided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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