TaxTMI 
TaxTMI 
2013 (7) TMI 30
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....of the appellant that since notices u/s 148 of the Income-tax Act, 1961 had been validly served on the appellant or his authorized representative for AY 2001- 02, in accordance with the provisions of Section 282 of the Income tax Act, 1961,the reassessment proceedings are invalid, void and without jurisdiction. 3) That the orders passed by the CIT(A) are against law and facts on the file in as much as CIT(A) was not justified to reject the contention of the appellant that for AY's 2001-no notices u/s 143(2) of the Income-tax Act, 1961 have been served on the appellant within the statutory time period of twelve months, these assessment are thus null and void ab-initio. B. On merits of additions for all years:- (4) That the CIT(A) erred in law and on facts in holding that the alleged Pen Drive had evidentiary value in as much as the same was a illegal, fabricated and a product of false storey spun by the Punjab Police by ignoring that: (i) Specific and clear cut findings of the Trial court that the Pen drive has no evidentiary value; (ii) Contradictory and inconsistent statements and actions of the Vigilance Bureau before the judicial ....
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....ommissioner of Income-tax (Appeals) XXXI, New Delhi is against law and facts on the file in as much as he was not justified in upholding the action of the Learned assessing officer in adding back a sum of Rs. 9,21,200/- (equivalent to US $ 20,000) on the ground that he appellant had allegedly made an unaccounted payment of US $ 20,000 to Mr. Park Young Tae of South Koreea by treating the same a alleged unexplained expenditure. 1.3. Revenue's appeal in A.Y. 2002-03 raises following sole effective ground: "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 25,35,220/- made by the Assessing officer on account of difference in amount of sale consideration of the property sold by the assessee and valuation report." 2. Brief facts leading to the controversy and about recovery of alleged pen drive by Punjab Police; passing on of that information to Income Tax Department and consequent proceedings are mentioned in the reasons recorded for reopening and other facts mentioned in assessment order for A.Y. 2001-02 for the sake of brevity and clarity they are reproduced hereunder: "Sh, Cheten.Gupte S/o Late Sh.....
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....o question No. 10 and 13 whereby he failed to deny this fact that this pen drive among other items was found from his possession by the Vigilance Bureau team and a recovery memo was also drawn by them. It is an established law that any books of account, other documents or other valuable articles or things found in the possession or control of any person, it may be presumed that such books of account, other document or other valuable article or things belong to such person and that the contents of such books of account, other documents are true. The primary onus to establish the identity, genuineness and creditworthiness of the above said creditors is upon the assessee. In view of the aforesaid reasons, I have reason to believe that a sum of Rs. 40,49,77,905/- on account of credits, Rs. 7,35,49,141/- on account of interest paid and R.s. 84,86,363/- on. account of interest payable has been under assessed i.e. escaped assessment within the mean of section 147(b) of the Income Tax Act, 1961." Subsequently, the jurisdiction over the assessee was transferred to ACIT, Central Circle-5, New Delhi u/s 127 vide order F.No.CIT-I/CHD/2008-09/1572 by CIT-I, Chandigarh. On 28.11.2008....
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....ma, Sector-22, Chandigarh. Sh. Ved Prakash who has been working as regular Accountant for the last five-six years received the notice on behalf of the assessee as the assessee himself is rarely available at the given address. It may be pertinent to mention here that service of all the notices pertaining to the assessee group is effected at the address C/o Kiran Cineme, Sector-22, Chandigarh. Different employees of Kiran Cinema have been receiving these notices. Even in the case Smt. Vandana Gupta, assessee's daughter, service of notices has been effected at the address C/o Kiran Cinema, Sector-22, Chandigarh. And in this case else different employees have received the notices issued by this office and all the notices have properly been complied with and assessment made thereto has been accepted by the assessee. Even in other group case of M/s Jagtumal Kundan Lal, C/o Jagat Theatre, Sec. 17, Chandigarh service of notices has been effected at Kiran Cinema, Sector-22, Chandigarh. In this case also, different employees of Kiren Theatre have received the notices on behalf of assessee and proper compliance has been made by the assessee and assessment framed has been accepted by the a....
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.... I. Non Service of notice u/s 148 in terms of sec 282(1): 3. Ld. Counsel for the assessee Shri Ashwani Kumar contends that only by a valid notice u/s 148 of the Income Tax Act, 1961, AO assumes the jurisdiction for reassessment which is to be mandatorily served on the assessee in accordance with the statutory requirements as per section 282(1) of the Income Tax Act, 1961. It is a settled proposition of law that any illegality or infirmity in complying with the provisions of section 282 resulting in non-service of the notice divests the AO from jurisdiction to reassess. Such non compliance is fatal to the legality of the re-assessment and renders it invalid. Lower authorities reliance on section 292B claiming it to be curative for this defect has been held by the court to be untenable. In this connection the assessee derives judicial support from the following judgments:- - CIT v Hotline International Pvt. Ltd 296 ITR 333 (Del). - CIT vs Shital Prasad Kharag Prasad [(2006) 280 ITR 541 (All)]; - Laxmi Narain Anand Prakash vs. CST [(1980) 46 STC 71 (All) (FB); (1980) UPTC 125]; - Bhagwan Devi Saraogi v. ITO [(1979) 118 ITR 906 (Cal)]; ....
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.... proposition of department is contrary to terms of sec. 282(1) and settled case laws. 3.2. This view has been held by the jurisdictional High Court i.e. the Delhi High Court in the case of CIT vs. Rajesh Kumar Sharma [(2009) 311 ITR 235 (Delhi)]: A similar view has been taken by the Delhi High Court in CIT vs. Hotline International Pvt. Ltd [(2008) 296 ITR 333 (Delhi)]. 3.3. In view of these undisputed facts and legal position, it is clear that mandatory requirements for proper assumption of jurisdiction u/s 148 by a valid service of notice u/s 148 on the assessee has not been fulfilled by the AO. Consequently as per the mandates of Jurisdictional High Court the impugned reassessment is illegal; without jurisdiction and liable to be cancelled. II. Non Service of notice u/s 143(2): 3.4. It is further pleaded that the impugned reassessment has been made by the A.O. even without serving notice u/s 143(2) of the Act also which again is a mandatory requirement before making any assessment u/s 143(3)/147 of the Act. In the present case the assessing officer proceeded to complete the reassessment, after rejecting repeated and persistent objections of the assessee about non ser....
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....already accessed the data on the alleged Pen Drive, examined the same & prepared the notes on the data therein. Even the Assessment Order reads that the ADIT had received the print outs of the alleged Pen Drive from the VB. The retrieval of contents and printouts of the pen drive being taken by illegal and unsafe process, without prescribed cyber forensic procedure make the evidence illegal, unreliable and having no evidentiary value. The reasons recorded for reopening on this basis of such pen drive and print out are not proper, therefore the reasons be quashed. IV. Merits of the additions: a. Evidentiary value of Pen Drive and it's print outs: (i) The evidentiary value of alleged Pen Drive has been further has been turned down by the court of Special Judge, Ludhiana vide order dated 12.06.2007 (placed on pages 354 to 360 of paper book) wherein while releasing the assessee on bail the Hon'ble. Court categorically held that "the entries of Pen Drive are without any basis and has no legal value". The evidentiary value of alleged Pen Drive has been negated by the Ld. Court observing that "the data revealed from the Pen Drive is not corroborated by any oth....
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....bligatory on such authorities to accept the police version without independent enquiry and verification. The income-tax authorities are bound to independently decided the issue of ownership, belonging and contents of incriminating documents as per the settled cannons of income tax jurisprudence in an independent manner and are not obliged to summarily follow the Police authorities stand, the law rather cautions against the blind use of police forwarded evidence or statements. (vi). Reliance is further placed in this behalf on the following decisions:- - Income-tax Officer v. Jayaraman [(1987) 168 ITR 757 (Mad)]; - Keshavlal Punjaram v. Commissioner of Income-tax [(1983) 141 ITR 466 (Guj)]; - Commissioner of Income-tax Vs Thobhandas Jivanlal Gajjar [(1977) 109 ITR 296 (Guj)]. 3.6. The alleged recovery of the pen drive from the assessee is a false story fabricated by the police to frame the assessee. A bare reference to the panchnama dated 20.5.2007 (placed on 297 to 303 of paper book), prepared at the residential house of the assessee at 21, Maharani Bagh, New Delhi and at office 118, Ansal Bhavan 16, K.G. Marg, New Delhi would reveal that the ....
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....es that no safeguards were even shown to be provided to ensure that the data as stood stored in the alleged pen drive was not altered, deleted or tampered with during the police custody It has been admitted by the VB that data has been transferred to the CD by using the computer of the assessee. Such electronic record which has been ostensibly tampered with cannot constitute reliable evidence against the assessee in income tax proceedings. 3.9. Section 457 of the Cr.P.C lays down that whenever a police officer seizes any property, such officer has to seal the property and send the sealed property along with its report to the Magistrate having jurisdiction. Thereafter such seized property becomes the custodia legis of the court and the same cannot be transferred or appropriated except under the order of the court. In the instant case the VB had already tampered with alleged the pen drive and taken printouts before handing over the data to the court in blatant violation of principles of natural justice and section 457 of the Cr.PC. Therefore the alleged pen drive, its print outs have no sanctity or value as reliable evidence under income-tax Act. VI. Violation of Information Te....
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.... there exist demonstrative discrepancies in the seizure of pen drive and its reported by police one day prior date of seizure by said Rakesh Kumar and Gurcharan Singh, the evidence which is mired in admitted discrepancies cannot be used in income tax proceedings. 3.13. It was submitted that the VB has flouted the basic tenets of cyber forensics laws relating to collection, recovery and analysis of electronic evidence. Basic code of rules on the legal admissibility of electronic records so as to preserve authenticity, integrity, identity, and reliability of electronic record has been grossly violated by the VB while preparing the CD from the pen drive thus accessing the electronic record in violation of section 16 and section29 of the I.T. Act, 2000 as well as section 65B of the Evidence Act. For creating a "bit image copy" of the suspect hard disk (pen drive in the instant case). It is essential that a hash code is created for the "original" being copied so that the original can be preserved and not tempered with. Clone can then be subjected to analysis. Hard Drive Duplication Technology has normally the facility that a report is generated along with the hash code which can be j....
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....d finally computes the income of the assessee by treating all the credits in the aforesaid accounts as undisclosed income of the assessee in the guise of presumption u/s 292C which is not applicable. Thus, AO's conclusions are in complete contradiction to factual finding stating that assessee is a manager regarding "income/wealth of 148 persons" which has been "kept with him" and "administered by him". The entire edifice of working of undisclosed income of the assessee is at complete variance with the observations and findings recorded by Assessing officer. If the money belongs to the other 148 persons and has been "kept with him" for management or administration, the credits cannot be treated as income of the assessee. 3.16. The Ld Assessing Officer for AY 2001-02 vide letter dated 22-12- 2008 (pages 197 -200 of the Paper Book) provided the Appellant with a computation of the manner in which the figures of Rs. 43,69,45,655/-, which is simply a summation of the credit entries in the various accounts and no effort was made to arrive at the 'Peak Balance' to which the addition, if any, was to be limited in the interest of fair play, equity and justice. Similar letters ....
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....it amount as there is no introduction of funds but are just contra entries (Rs. 5,38,96,501/-) (Refer pages 207 to 212 of Paper Book) 3.21. In many accounts, there were debit entries also during the year which have also been reflected on the debit side in the said accounts. These debit amounts have been used either for funding the credit entries reflected in the respective accounts or for giving amounts to some other parties which also are reflected as credit in the said other accounts. As a simple accounting practice the said debit amounts are to be deducted from the credit entries, which has not been done by assessing officer in many accounts. The said amount has been derived by totalling the debit side of the respective accounts wherever reflected and not considered by the Ld Assessing Officer aggregates to Rs. 27,44,40,888/-. ( pages 207 to 212 of Paper Book) 3.22. The pen drive is one single piece of evidence, if the same is to be treated as correct logically all the entries mentioned therein including debits and credits are to be considered correct and given due effect as they flow from the same evidence. An evidence cannot be held to be part true and part false, more s....
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....ive contents, the quantum of peak credits which may at all be held as undisclosed income for AY 2001-02 comes to Rs. 58,43,001/-. Complete details for such working has been furnished with authorities below and placed at page 214 to 245 of the Paper Book. Taking into account the opening debit balance of Rs. 6,63,46,242/- (page 210 of the Paper Book) and peak credit of Rs. 58,43,001 no addition on the basis of the peak credit is called for as would be clear from the following : Peak Credit balance for AY 2001-02(As on 11.09.2000)(Refer Page 229 of PB) : Rs. 58,43,001/- Less: Opening debit balances in the pen drive : Rs. 6,63,46,242/- Balance (Refer paper 215 of Paper Book): (-): Rs (6,05,03,241/-) Undisclosed income for AY 2001-02 : NIL Ld AO or CIT(A) have not offered any adverse comments on such working furnished by the assessee. 3.25. From the perusal of above, it is evident that there is negative inflow and no fresh introduction of any undisclosed credit balance during the year in the print outs; rather the opening debit balances have been used for the role over. In the absence of any fresh introduction of cash or credit, no addition as undiscl....
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....stances where the interest form various accounts is credited to various parties accounts and then it was further transferred from the said accounts to another consolidated interest by crediting the one account and debiting the another. In view of that, thee entries are nothing but recording as a journal entries i.e. one original entry and the other just transfer to consolidated interest account. Thus, both the entries are contra and have no impact on calculation of undisclosed income. However, assessing officer has added such contra also as undisclosed income in the computation. 3.30. Profit and Loss - The expenditures have been transferred to P&L Account by crediting the respective expenditure head like interest and debiting the P&L Account. The said entries are in no way unexplained credits as there are against just transfer entries to P&L A/c. 3.31. Opening balance -- in most of the accounts, opening credit balance has been ignored which being part and parcel of same seized material alleged pen drive and print outs are to necessarily considered in the previous and subsequent year as the case may be. However, in many instances, opening credit and debit balances also have be....
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....iled with AO and CIT(A) and is furnished at PB pages 224-275. 3.35. Coming to the undisclosed income relatable to AY 2002-03, the debit opening balance for which no credit has been given amounting of Rs. 5,07,53,587/- (Refer page 223 of the Paper Book) is to be reduced from the peak credit balance. Accordingly no addition on the basis of the peak credit is called for as would be clear from the following: Peak Credit balance : Rs. 36,89,310/- (As on 09.04.2001 covering letter 8-12-09)(Refer Page 224 of the Paper Book) Less: Opening debit balances used for : (+) Rs. 5,07,53,587/- (Refer paper 223 of Paper Book) Balance: (-) Rs (4,70,64,277/-) Undisclosed income for AY 2002-03 Rs. NIL Asstt. Year 2003-04: 3.36. With regard to the proposed addition of Rs. 8,08,26,928/- an item wise analysis of the various entries was furnished to the Ld Assessing Officer (pages 241-242 of the paper book) as follows:- Alleged credits as per working 8,08,26,928 Less: Mistakes to be corrected 2. Credit balance reutilize 2,13,67,355 3. Opening credit balance and reutilized 1,38,14,351 4. Opening Debit bala....
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....ing a subsequent assessment year. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year. Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed income. A number of circumstances of vital significance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of und....
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.... (Appeals) and the Tribunal has not deleted the addition made by the Assessing Officer as an unexplained cash credit under section 68 of the Act, as it was explained, but it has been deleted on the ground that the deposits were out of sale made out of the books of account and the addition to that extent has been sustained. We do not find any error in the view of the Tribunal inasmuch as the revenue before the Tribunal has not challenged the view of the Tribunal. 7. In view of the foregoing discussions, both the questions referred to us are answered in the affirmative, i.e., in favour of the assessee and against the revenue. (iv) The Pune Bench of the Tribunal in the case of Kantilal & Bros V. ACIT 52 ITD 412 has observed as under:- "It is a cardinal principle of law that no one should be harassed twice for the same cause. The assessee's main argument was that the piece of paper impounded reflected only the borrowings of the assessee. These borrowings were utilised by the assessee for acquiring the assets found during the search. Unfortunately, most of the borrowings were not supported by proper confirmation. Apprehending the situation that the credito....
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....e from M/s. Chogalal Bhimraj, a firm. This return was accepted under section 143(1) on 19th March, 1983, in a routine manner. On the basis of certain incriminating documents seized in the course of search, the assessing authority opined that there was an escapement of income. Accordingly, he issued a notice under section 148 and found that there was unexplained investment in the money-lending business during the period 24th May, 1980, to 1st Nov., 1980, aggregating to Rs. 78,000. Thus, an addition was made of Rs. 78,000 on account of alleged unexplained investment in the money-lending business. This was confirmed by the CIT(A). Before the Tribunal, it was contended that the Assessing Officer has committed error in taking the debit side only, he could take into account the peak credit. This contention was accepted and worked out the peak credit of Rs. 48,000 out of the addition of Rs. 78,000 made by the Assessing Officer. Thus, the Tribunal sustained the addition only to the extent of peak credit of Rs. 48,000. 3. In DB IT Ref. No. 1/1998 the Assessing Officer added a sum of Rs. 50,000 as income from undisclosed sources as interest income. It was found that a sum of Rs. 50,....
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....der gets compounded by the absence of a speaking order in this behalf by the AO. Thus the order suffers from violation of the principles of natural justice, not availability of relevant facts and non speaking order. The Learned Assessing Officer has merely and mechanically relied on the report/documents received from an external agency without conducting any independent enquiries, verifications and allowing the examination of material and cross examination and relevant evidence. 3.41. Reliance in this behalf is placed on the following case laws:- - Bagsu Devi Bafna Vs. CIT (1966) 62 ITR 506 (Cal). - Kishinchand Chellaram Vs. CIT (1980) 125 ITR 714 (SC. 4. Ld CIT(DR) on the other hands vehemently contends that 148 proceedings in questions are validly initiated and the reopening of assessments and finalization thereof is perfectly justified. (i) Apropos the admissibility of pen drive as evidence it is pleaded that there is deference between criminal and income tax proceedings. In criminal proceedings there may be any issue contested by the assessee, but in income tax proceedings the pen drive having been found from the possession of the assessee, it b....
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....an Theatre have received-the notices on behalf of assessee and proper compliance has been made by the assessee and assessment framed has been accepted by the assessee. Copy of notices received by different employees at KiranTheatre is enclosed for ready reference . 2. The assessee has raised the issue that notice u/s 143(2) was not issued and served at all. Assessee filed letter dated 12-12- 2008 stating that original return filed may be treated as return u/s 148. On the same date notice u/s 143(2) was issued and was send-by speed post. A copy of the said notice alongwith speed post challan is enclosed for your kind perusal. Furthermore section 29288 also, applies in the instant case. Section 2928B says "Where an assessee has appeared in any proceedings or co-operated in any inquiry relating to any assessment or reassessment, it shall be deemed that any notice under any provision of this Act. which is required to be served upon him. has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceedings or inquiry under this Act that the notice was - (a) not serv....
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....ceedings. Therefore, it cannot be said that assessee had no knowledge of proceedings or he was not given opportunity of hearing. In subsequent AYs 2006-07& 07-08 assessee himself has given the address of Kiran Cinema and not Jagat Cinema, consequently there is no merit in the objection of assessee that notices u/s 148 or 143(2) were not served on the assessee and the reassessment proceedings are bad in law. 4.3. Apropos the alternate pleas on merit, Ld CIT(DR) contends that the benefit of telescoping , setoff and working peak credit is essentially a matter of fact and it depend on case to case. In assessees case there is no scope to extend such adjustments and benefits as facts are peculiar in this case. Wherever justified such benefits have been given to the assessee. Reference is made to some relevant findings of the AO "It has not been brought out for what purpose the amount was withdrawn and redeposited. Unless such purpose brought in form of evidence, this credit of redeposited out of withdrawal previously cannot be granted. It is not known with certainty that the same money which was withdrawn had been redeposited. The utilization of the money withdrawn has not be....
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....s the discharge of burden to prove the eligibility for peak credit benefits, ld. Counsel vehemently argues that assessee has accepted the pen drive on without prejudice basis. It is a legal right of the assessee to raise alternate submissions, for which assessee has given each and every detail in respect of entries in the pen drive. They are on day to day basis; entry to entry basis; and are part of the paper book. Authorities below have not examined even a single entry and a sweeping finding has been summarily given that assessee has not discharged his burden. The question which arises is when no query about any entry is called for, by the AO or CIT(A), how can it be held that assessee has not discharged his burden for peak credit benefits.. Having provided every detail there is no doubt that assessee on his part has discharged burden and it is the department who has not rebutted the burden in any effective manner. 6. We have heard the rival contentions and perused the material available on record. The questions posed before us by these appeals are: (i) Whether there exist live nexus between the materials and reasons to come to a reasonable belief that income has escap....
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.... prejudice basis, but the fact remains that the entries have correlation with assessees activities. In this view of the matter the contents of the pen drive become admissible evidence in Income Tax proceedings and form a basis for investigations and additions. Consequently we hold that pen drive and print outs thereof constitute admissible evidence in these proceedings. The reasons for reopening were recorded on the basis of these contents. In view of the fore goings the reasons recorded for escapement of income and the material available on record with AO have a live link with each other. Thus, we hold that the reasons for reopening the assessments were properly recorded by AO. This question is answered against the assessee. 6.3. Coming to the next question which is raised in only AY 2001-02, it is by now settled by various courts including jurisdictional high court and apex court that for proper assumption of jurisdiction by AO, a valid service of notice in terms of sec 282(1) is a mandatory legal requirement. Hon'ble Delhi High Court in the case of Hotline International (supra) held the service of notice to be mandatory as under: 22. As per order V, rule 12 of the C....
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.... with the finding given by the Tribunal which is a finding of fact and as such there is no force in the present appeal. 29. Accordingly, the present appeal filed by the revenue is, hereby, dismissed." 6.4. Hon'ble Supreme Court also has echoed the same view in the case of Hotel Bluemoon (supra) by following observations: Section 158BC(b) provides for an enquiry and assessment. The said provision reads "the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of sections 143, 144 and 145 shall, so far as may be, apply". An analysis of this sub- section indicates that after the return is filed, this clause enables the Assessing Officer to complete the assessment by following the procedures like issue of notice under section 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The Assessing Officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the noti....
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....ncome for a block period under the provisions of section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment can be made without issuing a notice under section 143(2). [Para 15 6.5. It may be mentioned that provisions about service of notice u/s 158BC and 148 are in pari materia and refer to sec 282(1). Assessee has relied on a catena of judgment. Since this issue is squarely covered by recently decided judgments by Hon'ble Delhi High court and Apex court we feel no necessity to go to other earlier judgments for the sake of brevity. In view of the above we hold that for valid assumption of jurisdiction to frame a reassessment, a proper and valid service of notice u/s 148 on assessee is mandatory requirement violation thereof will result in quashing of the reassessment proceedings. 6.6. Coming now to the question as to whether there is proper service of 148 notice on the assessee in AY 2001-02. Assessee has demonstrated that the notice was issued/sent at an address different than the one mentioned in his return of income. Department also admits that the notice was served not on assessee but on one Shri Ved Praka....
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....Apropos the peak credit working, set off of opening balances, contra entries, roll over utilization of funds which has been explained in details above; assessee vehemently claims to have fully reconciled the details about each and every entry. The details working thereof were filed before AO and thereafter before ld CIT(A), who called for w remand reports also. These details are placed before us also on the various paper books. Some of the relevant pages thereof are mentioned above. 6.12. AO and CIT(A) have given some rebates or set off of interest receipts and payments. Assessee claims that his reconciliation of entities is supported by facts and material on record and is backed by the legally established propositions of peak credit working, telescoping and set off, which have not been given to assessee despite the remand reports. It is agitated that assessee's valid contentions have not been considered at all. On one hand assessee is considered as money manager for others, thus his ostensible role will be to hold such funds in trust for others, receive or pay them on the instructions of principals and to earn some managerial remuneration thereon. On the other hand in the g....
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....rary practice will lead to disastrous result and unthinkable additions which are neither justified nor warranted by the material on record. It has been pleaded that assessee has discharged its burden in explaining each and every aspect necessary for arriving at a fair and reasonable assessment. Lower authorities have failed to rebut the discharge of burden by the assessee in reconciling his peak credit working. Therefore the peak working as offered by the assessee deserves to be accepted. 6.16. After careful consideration of facts, circumstances and material available on record, case laws and rival contentions it will be desirable to dwell on the aspects of peak credit; telescoping, set off of entries, availability of opening balance and its effect in such print out; this is necessary for arriving at a fair estimate of the deemed income of the assessee for AY 2002-03 and 2003-04. 6.17. Such concepts are well known in the law with a rider of caution that they are question of facts and depend on case to case. Hon'ble Supreme court and various other High Courts have laid down the propositions that such adjustments can be applied while making the assessments in the cases of w....
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....y CIT(A). 6.23. The peak credit theory and the benefit of telescoping is generally accepted as it is logical and acceptable provided there is reasonable material to show that withdrawals or repayments could have been available on the date of subsequent credit or repayment, more so, in the accounts of different persons. The fact that assessee has been held to be a fund manager for 148 persons for which the moneys are frequently withdrawn or deposited as per these case laws and facts and circumstances of this case assessee will be entitled to work out a peak credit and avail the benefits of telescoping. We may hasten to add that it is not a proposition of law but the exercise is to be undertaken on the inferences based on normal preponderance of probabilities and based on normal human conduct. The department is entitled to displace such propositions advanced by the assessee on cogent reasons and not by summary rejection of the explanation. In the next para we will be dealing with various case laws right upto Hon'ble Supreme Court where this factual preposition has been upheld subject to certain conditions. 6.24. The important question which arises is whether the assessee ha....
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....owing from the quashed reassessment cannot be verified. Subject to these observations the peak credit as worked out by the assessee at Rs. 36,89,310/- is held as undisclosed income for this year. (iii) For A.Y. 2003-04: On the same methodology the peak credit worked out by the assessee at Rs. 46,16,387/- is held to be the peak credit for this year. However, this peak credit is to be telescoped with the income of AY 2002-03 as the same was available with the assessee for utilization. Consequently, the taxable income for A.Y. 2003-04 is worked out as under: (i) Peak credit for A.Y. 2003-04 Rs. 46,16,387/- (ii) Less: Peak credit for AY 2002-03 Rs. 36,89,310/- Taxable income for AY 2003-04 Rs. 9,27,077/- 7. Thus, the undisclosed income to be included in the assessee's income is determined at Rs. 36,89,310/- for A.Y. 2002-03 and Rs. 9,27,077/- for A.Y. 2003-04. These grounds are accordingly partly allowed. 8. Apropos the remaining ground for AY 2002-03 in respect of addition of Rs. 9,21.200/- being alleged unaccounted payment of US $ 20,000 transferred to Park Young Tae, it is pleaded that his statement before Enforcement Directorate was taken behind....