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TMI Blog2014 (3) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... arch operation, notice u/s 153A of the Act was issued on 7-12-2009 declaring total income at Rs. 1,96,310/-. To be very specific, the assessee has raised only two materials grounds. The Ground No. 1 challenges the legality of action u/s 153A read with section 143(3) of the Act. This ground was not pressed at the time of hearing by the ld. AR of the assessee, hence the same is dismissed being not pressed. 3.1 The Ground No.2 which is on merit and challenged the confirmation of addition of Rs. 6,03,689/- added on account of undisclosed brokerage income. The facts of this ground are that, admittedly, no material or any incriminating evidence was found to support the impugned addition during the course of search. This addition is solely based on the statements recordd u/s 132(4) of the Act. The ld. AR apart from making oral submissions has filed the written submissions in this regard which is as under:- ''It is submitted that the Learned CIT(A) has erred in making the aforesaid addition/enhancement just on the basis of the statement of the assessee recorded u/s 132(4) without there being any supporting evidence. The action of the Learned CIT(A) is assailed as under : 1. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement is not reliable. There is no reason why the assessee was asked to supersede his earlier statement recorded at 8:15 AM. Further the authorized officer did not put any question that why there was difference between the incomes stated at 8:15 AM and at 12:30 PM. In view of all this it is submitted that the Learned CIT(A) was not justified in making the addition. The same deserves to be deleted. 2. Addition cannot be based merely on the basis of statement - It is also settled position of law that addition cannot be made purely on the basis of statement bereft of any supporting evidence. It has also been held that statement recorded u/s 132(4) is not incriminating material found during search. In view of this the Learned CIT(A) erred in making enhancement purely on the basis of statement of the assessee. There is no material on record correlating the statement of the assessee. The Learned CIT(A) has referred the following two case laws for making the addition. The same are analyzed below and are not applicable to the facts of the case of the assessee . (i) Rajnik and Co. Vs. ACIT (AP) 251 ITR 561 In this case additions were made with reference to loose slips and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect or conscious disclosure in a statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months. The main grievance of the AO was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advise. However, if such retraction is to be viewed in light of the evidence furnished along with the affidavit, it would immediately be clear that the assessee has given proper explanation for all the items under which disclosure was sought to be obtained from the assessee. In view of the aforesaid facts, submission of the assessee and the relevant case laws it is clear that the statement recorded at the time of search cannot be made basis for making addition in the income or any enhancement of the income. The Learned CIT(A) has further erred in not taking into consideration the settled position of law that when there are two diverse opinion on the same issue the one favourable to the assessee has to be followed 88 ITR 192. Copy of submission made before the Learned CIT(A) is available on paper book page no. 38 to 53. In view of the aforesaid submissions the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,24,77,126/- on account of interest income which is not the real income of the assessee and was calculated without any basis. 6. The assessee prays your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.'' 5.1 During the course of hearing, the ld. AR has not pressed the Ground No.1 and 2. Hence, the same are dismissed being not pressed. 6.1 The Ground No. 6 of the assessee is general in nature which does not require any adjudication. 7.1 The ground Nos. 3 and 4 are in connection with one issue only. The facts apropos to this issue are that during search certain loose papers were found and seized from the assessee. These papers contain debit and credit entries for which the assessee has got no explanation. As per the assessee, only peak credit theory is applicable in such cases. According to the assessee, the entries should be so arranged in serial order that a credit following a debit entry should be treated as referable to the latter to the extent possible and that not the aggregate but only the 'peak' of the credit should be treated as unexplained. The A.O. has calculated the peak amount and has made the impugned addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded in the computer by the assessee himself for working of the peak. As such the Learned Assessing Officer has observed that the peak credit was virtually worked out by the assessee himself. But this assertion of the Learned Assessing Officer is wrong. The assessee only assisted the staff of the Learned Assessing Officer and did not work out the peak himself. The assessee had submitted a written letter on 17.08.2009 copy of which is available on paper book page no. 37. In this letter it has been specifically mentioned that the total of credits is Rs. 3,15,00,000/- and total of debits is Rs. 3,21,61,000/- and the assessee has further submitted that only after consulting the counsel the undisclosed income will be surrendered. Therefore the assessee cannot be blamed for working out the peak which is wrong. The assessee further submitted letter on 23.12.2011 and 26.12.2011 that the working of peak may be supplied so that a cogent reply be submitted. Copies of these letters are available on paper book page no. 38 to 39. The working of the peak done by the Learned Assessing Officer was never supplied. It has come to the assessee only along with the assessment order. The several defects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are creditors and some name are appearing as creditors which are in actual our debtors like Shri Badri Narain Sodani is our creditor for Rs. 25,00,000/- whereas in working he is appearing as debtors for Rs. 23,18,900/-. Therefore, the entire working is not reliable. Likewise there are certain discrepancies in the name and amounts. Because Shri Badri Narain Sodhani has given us the amount before the dates mention in rough noting and we returned the same to him in the period mention in the paper." The Learned Assessing Officer has failed to address the mistakes. He has brushed aside the objection of the assessee simply on the ground that how could the assessee know whether the entry was a debtor or a creditor. The Learned Assessing Officer is wrong in making such observation. The debits and credits were apparent from the loose sheets. They are written on different sides of the paper as such there was no discretion left to the assessee in indentifying a debtor or a creditor. 4. Section of the act is not quoted - It is further submitted that in the entire assessment order the Learned Assessing Officer has no where quoted the relevant section under which addition of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t did not behove the Learned CIT(A) to state that the Learned Assessing Officer was justified in working out the peak on the basis of day to day balances whereas what was required was balance on entry to entry basis had to be considered for working out the peak credit. The assessee has submitted that the peak credit in the case of the assessee worked out only to Rs. 52,40,137/-. (b) Only commission income is assessable - Notwithstanding the aforesaid submission of considering the peak credit in the hands of the assessee, the main submission of the assessee is that only commission income is assessable in his hands. Such commission income would worked out to Rs. 9,16,781/- (@ 0.10% on total of the credits 91,67,81,272/-). The department has not been able to disprove that assessee was not a finance broker. The assessee has no tangible assets to as to have capital as assessed by the Learned Assessing Officer. It is relevant that assessee has not been able to pay even a single penny against the outstanding because he has no means to pay and the department has not been able to locate any asset in the hands of the assessee. This only goes to prove that assessee was a small tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count' i.e., to account, means to reckon, and it is difficult to conceive of any accounting which does not involve either additions or subtractions or both of these operations of arithmetic. A book which contains successive entries of items may be a good memorandum book; but until those entries are totalled or balanced, or both, as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a "book of account" in a commercial sense. The term "books of account" referred to in sub-cl. (1) of Expln. 5 to s. 271(1)(c) means books of account which have been maintained for determining any source of income. The term "source of income" as understood in the IT Act is to identify or classify income so as to determine under which head, out of the various heads of income referred to in s. 14, it would fall for the purposes of computation of the total income for charging income-tax thereon. Thus, the term "books of account" referred to in this relevant sub-clause of Expln. 5 would mean those books of account whose main object is to provide credible data and information to file the tax returns. A credible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of this account represents the net profits or the net losses for the period under review. The object of a P&L a/c is to ascertain the income of a business and by offsetting the expenses of earning that income, to ascertain the net increase (profit) or decrease (loss) in the traders' "net worth" for the period. Balance sheet lists the assets and liabilities and equity accounts of the company. It is prepared 'as on' a particular day and the accounts reflect the balances that existed at the close of business on that day. By following the judgment of the Madras High Court cited supra and taking note of the definition of the books or books of account in the IT Act as well as in P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edn. 2005, and also the meaning of the P&L a/c and balance sheet, we can safely conclude that the P&L a/c and the balance sheet are not the books of account as contemplated under the provisions of the Act. The learned standing counsel for the Revenue has not placed any authority or any case law or any other material or evidence to show that the books of account includes P&L a/c and balance sheet. Books in which merchants, businessmen, and traders generally kee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) has wrongly upheld this addition u/s 69B. The relevant section is quoted below: - "Amount of investments, etc., not fully disclosed in books of account. 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the 34[Assessing] Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the 34[Assessing] Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.]" The perusal of the aforesaid section reveals it is applicable for investment in the acquisition of bullion, jewellery or other valuable article. There is no mentioned of investment in debtors. The section stipulates inherently that the investment exceeds the amount shown in the books of accounts. This is not the position in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected , therefore, this addition has also been wrongly made and upheld u/s 69B of the Act. Hence, in our considered opinion, only commission income has to be determined in this case and nothing more. Accordingly, we reverse the findings of the ld CIT(A) and order to delete the entire addition so made. Thus Ground Nos. 3 and 4 of the assessee are allowed. 8.1 The next ground No. 5 which pertains to confirmation of addition of Rs. 1,24,77,126/- made on account of interest income which is not the real income of the assessee. 8.2 The facts of this Ground No. 5 are that the A.O. has calculated the notional interest on Rs. 91,67,81,272/-. As per the assessee, no estimated addition is justified under the proceedings carried out u/s 153A of the Act. It is not the case of the A.O. that there are documents indicating the receipt of interest by the assessee. The A.O. has not provided any details of calculation of this interest whereas the ld CIT(A) has calculated the interest on the total credit on rotational basis. The vehement case of the assessee is that no such notional interest can be added u/s 153A of the Act. In this regard, the reliance has been placed on the following decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the real income of the assessee and was calculated without any basis. 6. The assessee prays your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.'' 11.1 During the course of hearing, the ld. AR has not pressed the Ground No.1 and 2. Hence, the same are dismissed being not pressed. 12.1 The Ground No. 6 of the assessee is general in nature which does not require any adjudication. 13.1 The Ground Nos. 3 and 4 are in relation to the addition on the basis of peak credits and accepted the amounts involved. The entire facts are identical to those facts which obtained in A.Y. 2009-10 as above. Like wise the facts of Ground No. 5 are also identical to A.Y. 2009-10. The arguments of both the parties in this regard are same and similarly. Therefore, based on the same reasoning, we delete the impugned additions raised in Ground No. 3, 4, and 5 and allow these grounds of appeal of the assessee. In the result, the appeal of the assessee is partly allowed 14.1 The corresponding appeal of the Revenue raises following grounds:- ''1. On the facts and in the circumstances of the case, the ld CIT(A), Central, Jaipur has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered by the assessee in assessment Year 2009-10 at Rs. 52,40,137/- and Rs. 8,94,407/- in Assessment Year 2010-11. No separate addition is called for on account of the availability of cash. The same is out of the credits/realization of debits of which peak amount of Rs. 52,40,137/- has been surrendered in Assessment Year 200910. It is further submitted that the cash found does not exceed the peak amount of Rs. 52,40,137/- which has been worked out for the period ending 31.03.2009 whereas the cash has been found on a subsequent date i.e. 23.07.2009. In these circumstances there is totally no justification for treating the cash unexplained in the background of the surrender of the peak amount of Rs. 52,40,137/-." 17.1 On the other hand, the ld DR has relied n the orders of the authorities below . 18.1 We have heard the rival submissions and have carefully perused the entire material on record . During search, the loose papers were found for the period 01-062009 o 30-06-2009. As per the assessee, this money belonged to other persons as he was engaged in finance brokerage. However, this surrender was for the purpose of tax. This money was treated out of debtors pertaining to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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