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TMI Blog2024 (2) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Income-tax Appellate Tribunal is correct in deleting the addition of Rs. 3,33,18,027, made in accordance with the order of the Tribunal in case of Sri Praveen Kumar Agarwal, being commission earned @ 2% of the accommodation entries passed to the extent of Rs. 166.59 crores? iii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in deleting addition of Rs. 166.59 crores made under section 68 of the Income-tax Act, 1961 being unexplained cash credits in the bank accounts of the assessee, the source whereof was not proved? iv) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in substituting the income of Rs. 4,07,17,055 as peak credit, on the basis of its order in case of Sri Praveen Kumar Agarwal, in place of additions on account of commission and cash credits without appreciating the difference in the facts of the two cases?" Facts 4. Briefly stated facts of the present case are that search and seizure operation under Section 132 of the Income Tax Act, 1961 (hereafter referred to as the 'Act of 1961') was conducted in the business an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed by the CIT(A) by an order dated 30.12.2008. Aggrieved with the order of the CIT(A), the respondent/assessee filed ITA 515(Kol) of 2009 before the Income Tax Appellate Tribunal, A-Bench, Kolkata which was partly allowed by an order dated 14.10.2009. The tribunal determined the income of the assessee at Rs. 4,07,17,055/- applying peak credit principle, which included brokerage. Aggrieved with the aforesaid order of the ITAT, the department has filed the present appeal. Submission 7. The learned counsel for the appellant submits that the tribunal has erred in deleting the addition under Section 68 of the Act, 1961 and further committed manifest error of law to apply the principle of peak credit. He submits that the cash deposit of Rs. 166.59 corers remained totally unexplained by the respondent/assessee's income and, as such, the entire amount was correctly added by the assessing officer and upheld by the CIT(A) in the respondent/assessee invoking Section 68 of the Act, 1961. He referred to provisions of Section 68 of the Act, 1961 and relied upon the judgment of Hon'ble Supreme Court in Principal Commissioner of Income Tax (Central-1) Vs. NRA Iron And Steel Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to Rs. 166.59 Crore in the year under consideration i.e. Rs. 3,33,18,027/- is taken as assessee's income from business by way of commission. 11. Thus, as per assessment order, one Sri Praveen Kumar Agarwal was the assessee's principal broker and the assessee has earned brokerage / commission @ 2% on the cash deposit of Rs. 166.59 crore which comes to Rs. 3,33,18,027/-. This commission/brokerage of Rs. 3,33,18,027/- was assessed as income of the respondent assessee. 12. In appeal, the CIT(A) upheld the assessment order and dismissed the appeal of the assessee, holding as under:- "In order to avoid such speculation, it is held that the commission income in the assessment order will be treated as the income accruing to the appellant from making the funds credited to the appellant's account available for accommodation entries. Consequently, the appeal is dismissed." 13. Since the assessment of the respondent/assessee was based on materials found in the matter of aforesaid Sri Praveen Kumar Agarwal and addition made in the hands of said Sri Praveen Kumar Agarwal who and the Department contested the matter upto ITAT, therefore, the Tribunal followed its order in the case of Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he true nature and scope of Section 68 of the Act ? When and in what circumstances Section 68 of the Act would come into play ? That a bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion formed by the Assessing Officer that the explanation offered was not satisfactory. The assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority. All the decisions cited and referred to hereinabove are required to be appreciated and understood in the light of the law declared by this Court in Sumati Dayal (supra)." [emphasis supplied] 16. Section 68 of the Act, 1961 provides that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. In the present set of facts, we find that the assessee has disclosed complete details of bank accounts, cheques issued and the cash received from those to whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act, 1961. In paragraph 9.3 the Hon'ble Supreme Court has held that the initial onus is on the assessee to establish by cogent evidence; genuineness of the transaction and creditworthiness of the investors under Section 68 of the Act, 1961 by submitting proof of identity of the creditors; capacity of creditors to advance money and genuineness of the transaction. On facts of the present case, we find that the facts disclosed by the respondent/assessee before the authorities as briefly noted/discussed above, regarding cash deposits has not been disputed by the assessing officer in the assessment order and instead he held that the assessee is engaged in providing accommodation entries by receiving cash and issuing cheques and accordingly he determined the income of the respondent/assessee from brokerage @ 2% on the cash deposits. Under the circumstances, the addition made by the assessing officer under Section 68 of the Act, 1961 was unsustainable. 21. In the case of Praveen Kumar Agarwal (principal broker), the ITAT held that either 2% of the commission or the peak credits during the block period, whichever is higher, has to be taken as income. Therefore, the assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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