TMI Blog2014 (3) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... vely in one volume. A book which contains successive entries of items maybe a good memorandum book but until those entries are totaled 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. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the A.O. has further made an addition of ₹ 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the A.O. is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the A.O. has not properly prepared the list of debtors and creditors based on any logic CIT(A) has confirmed the addition under the Provisions of Section 69B - This section relates to investment made by the assessee in the acquisition of bullion/jewellery or other valuable articles but it does not speak about any investment in debtors. Moreover, Section 69B also stipulates the position where the investment exceeds the amount shown in the books of account. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been heard together. Therefore, for the sake congruence, convenience and brevity, we proceed to decide them by a common order. 735/JP/2013 A.Y. 2007-08 2.1 This appeal of the assessee for the A.Y. 2007-08 is directed against the order of the ld CIT(A), Central, Jaipur , dated 12-08-2013. 2.2 Briefly stated, the facts of the case are that a search u/s 132 of the Income-tax Act, 1961 ( the Act for short) was carried out on 23-07-2009 at the premises of the assessee, who is a finance broker and derives his income from the same. Consequent upon search operation, notice u/s 153A of the Act was issued on 7-12-2009 declaring total income at ₹ 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 ₹ 6,03,689/- added on account of undisclosed brokerage income. The facts of this ground are that, admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PM It is this statement on which the Learned CIT(A) has based the addition. It is submitted that between 8:15 AM and 12:30 PM much water flowed down the Ganges. The assessee was by this time under lot of pressure, stress and browbeating by the search party. In the face of this the statement recorded at 12:30 carries little value. Further in this statement also the assessee deposed in response to question no. 22 on page 8 that it was during last 3-4 years that he was enjoying income in the bracket of ₹ 70000/- to 75000/- per month from commission. The statement is purely on estimate without specifying specific period and expenses. Such statement 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anch) (2002) 77 TTJ (Jd) 640 Statements recorded during search are not evidences found during search. Addition cannot be made on the basis of statement alone. (d) Kailashhen Manharlal Chokshi Vs CIT (2008)14 DTR 257 (Guj) It is also to be seen as to whether an addition made is merely based on the statement recorded by the AO under s. 132(4) and whether any cognizance may be taken of the retracted statement. So far as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under s. 132(4) at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed. 3. Under the facts and circumstances of the case, the ld CIT(A) has erred in confirming the addition of ₹ 3,21,31,893/- as income on the basis of peak creditors calculated by them ignoring the submissions of the assessee and without considering the contention of the assessee against declared peak of ₹ 52,40,137/- which was calculated on more scientific basis. 4. Under the facts and circumstances of the case, the ld CIT(A) has erred in confirming the addition of ₹ 32,42,597/- as own unexplained cash/capital employed in debtors after addition of ₹ 3,21,31,893/- which amounts to double addition and without considering the surrender of ₹ 52,40,137/- by the assessee. 5. Under the facts and circumstances of the case, the ld CIT(A) has erred in confirming the addition of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly balance sheet prepared, it is found that in the Financial Year 2008-09, the maximum amount received from various parties (which he is not identifying) was ₹ 3,21,31,893/- besides his own cash amount of ₹ 32,24,597/- meaning thereby he has employed his own capital on 24.03.2009 to extent of ₹ 3,53,56,490/-. Since this capital is totally unexplained, it is required to be assessed as undisclosed income of the assessee for Assessment Year 2009-10 which he has utilized in the form of undisclosed cash debtors. The above para clearly shows that the Learned Assessing Officer has accepted the fact that the capital employed in the finance business will be deemed to belonged with the assessee. In view of this the peak credit had to be worked out accordingly. The Learned Assessing Officer has referred in para 9 as well as in the show cause issued on 28.12.2011 that the transaction entries were feeded 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect head for interest and principal. Whereas as per show cause notice there is no match of interest and principal amount. The Learned Assessing Officer has not pointed out any mistake in the working of the peak by the assessee. As per the assessee the peak credit for the Assessment Year 2009-10 comes to ₹ 52,40,137/-. This includes each and every item of credit minus debit as well as any capital alleged to belong to the assessee. In the circumstances the same deserves to be accepted. 3. Specific instances of mistakes committed by the Learned Assessing Officer in working out the peak In the reply dated 29.12.2011 copy of which is available on paper book cited supra it was submitted that the Learned Assessing Officer had committed lot of mistakes in working out the peak. The relevant para is quoted below The second error which is appearing in the trial balance provided by you is that some names are appearing as debtors whereas they are creditors and some name are appearing as creditors which are in actual our debtors like Shri Badri Narain Sodani is our creditor for ₹ 25,00,000/- whereas in working he is appearing as debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is submitted that the Learned CIT(A) has not been able to support in what manner the Learned Assessing Officer worked out the peak credit. It is only in the round about mode that the Learned CIT(A) has avoided the issue. It has been mentioned by the Learned CIT(A) that the peak credit was worked out with the help of the assessee from the basis of day to day balances. The Learned CIT(A) has held that in the case of the assessee it is the total of a day balance which has to be considered and not the balance after minus the debits. In this regard it is submitted that the finding of the Learned CIT(A) is erroneous. Firstly whatever credit entries were available on the loose papers these apparently disclosed the name of persons wherefrom the money had come that is to say the money did not belong to the assessee and hence only commission @ 0.10% was assessable in the hands of the assessee. AND in any case if the credits were to be considered as money belonging to the assessee then the peak theory had to be applied in letter and spirit. It 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;] Further the following case laws are quoted in support that loose sheets are not books of accounts: - (i) Sheraton Apparels Vs. ACIT (2002) 256 ITR 20) If books of account is considered in isolation, then, it may mean books in which merchants, traders and businessmen generally keep their accounts and are maintained for recording (a) all receipts and expenses with matters relating thereto; (b) all sales and purchases; and (c) the assets and liabilities. They are the documents and ledgers which must be prepared and kept by the business entity including the P L a/c and the balance-sheet. In traditional terms, books means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. It may also be assumed that it connotes the intention that it should serve as a permanent record. At the same time, the term of account i.e., to account, means to reckon, and it is difficult to conceive of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to hide or conceal income so as to avoid imposition of tax thereon. The words in Expln. 5 books of account, if any, maintained by him for any source of income are important words signifying the legislative intent embodied in the Explanation warranting grant of immunity from penalty. The legislative intent is to admit only those books of account maintained by the assessee on his own behalf as by their very nature and circumstances are maintained for the purposes of drawing the source of income. (ii) COMMISSIONER OF INCOME TAX vs. TAJ BOREWELLS (2007) 291 ITR 232 (Mad) So, the books of account is defined as any book which forms an integral part of system of book-keeping employed in any particular business and consequently includes both the ledger and the books of original entry. The P L a/c of a trade is the statement wherein the various items of profit and revenue on the one hand and the losses and expenditure on the other hand, are collected and offset, the one class against the other, that is, in compiling such an account being-debit all the losses, credit all the gains. The resulting balance of this account represents the net profits or the net losses f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f statement u/s 132(4). Hence the ratio of the case is not applicable to the facts of the case of the assessee. GROUND NO.4 :- Under the facts and Circumstances of the case the Learned CIT(A) has erred in onfirming the addition of ₹ 32,42,597/- as own unexplained cash/capital employed in debtors after addition of ₹ 3,21,31,893/- which amounts to double addition and without considering the surrender of ₹ 52,40,137/- by the assessee. It is submitted that over and above the peak credit the Learned Assessing Officer has made further addition of ₹ 52,40,137/- on account of debtors exceeding the creditors. The entire exercise of the Learned Assessing Officer is full of drawbacks. The peak determined by the Learned Assessing Officer was faulty and so is the position of the debtors and creditors. Once the peak amount has been added there was no occasion for making a separate addition of ₹ 52,40,137/-. The list prepared of debtors and creditors has no base. It has been prepared by the Learned Assessing Officer to his sweet will and convenience. Further it has not been mentioned under what section this addition is justified. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um book but until those entries are totaled 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. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the A.O. has further made an addition of ₹ 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the A.O. is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the A.O. has not properly prepared the list of debtors and creditors based on any logic. The ld CIT(A) has confirmed the addition of ₹ 52,40,137/- under the Provisions of Section 69B of the Act. This section relates to investment made by the assessee in the acquisition of bullion/jewellery or other valuable articles but it does not speak about any investment in debtors. Moreover, Section 69B also stipulates the position where the investment exceeds the amount shown in the books of account. Since the assessee does not maintain any books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaipur dated 16-08-2013 for the A.Y. 2010-11. 10.1 The assessee has raised the following grounds in his appeal. 1. That under the facts and circumstances the ld A.O. has erred in completing the assessment on the basis of deaf, dumb and rough noting which are nothing more than rough papers. 2. The order passed by the ld. A.O. u/s 153A/143(3) is void ab-initio deserves to be quashed. 3. Under the facts and circumstances of the case, the ld CIT(A) has erred in confirming the addition of ₹ 1,39,84,591/- as income on the basis of peak creditors calculated by them ignoring the submissions of the assessee and without considering the contention of the assessee against declared peak of ₹ 8,94,407/- which was calculated on more scientific basis. 4. Under the facts and circumstances of the case, the ld CIT(A) has erred in confirming the addition of ₹ 56,03,437/- as own unexplained cash/capital employed in debtors after addition of ₹ 2,64,61,717/- which amounts to double addition and without considering the surrender of ₹ 52,40,137/- in the earlier year and ₹ 8,94,407/- in the year under consideration by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at extent are correct. Therefore, the Ground No. 1 and 2 of the Revenue s appeal stand dismissed. 16.1 In Revenue s appeal, there is one more ground which pertains to deletion of addition of ₹ 25.00 lacs made by the A.O. on account of unexplained money u/s 69A of the Act. The submissions regarding this ground are as under:- The Learned CIT(A) has deleted the addition after considering the submission of the assessee holding that the cash found was fully covered in the additions made u/s 68 and 69B. The assessee deserves to be given benefit of telescoping. The action of the Learned CIT(A) requires to be confirmed. The submission made before the Learned CIT(A) is quoted below:- The addition made by the Learned Assessing Officer is on account of confusion. The Learned Assessing Officer has failed to properly appreciate the facts. In this case the searchwas conducted on 23.07.2009 and during the course of search loose papers were found for the period pertaining to 01.06.2009 to 30.06.2009. It means the assessee was earning income from finance brokerage was having money in circulation. Such money although belongs to other persons but was surrendered f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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