TaxTMI 
TaxTMI 
2018 (6) TMI 957
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....e assessee. The Punjab Police Vigilance Bureau registered FIR No. 5 dated 23.03.2007 in connection with Ludhiana City Centre Scam an assessee was arrested on 17.05.2007. The police have recovered a computer and pen drive from the assessee. The print out from the pen drive showed that the assessee had received credit entries from various persons. In the said pen drive, ledger accounts of various persons/parties have been mentioned. In the charge sheet filed by the police, it was clearly brought out that the entries in the pen drive represent unaccounted income of various persons being deposited with the assessee. As such, the pen drive represents the accounts of such unaccounted transactions which were being kept and maintained by the assessee. The peak credit of all the credit entries maintained in each and every ledger account has been worked out which comes to Rs. 43,67,62,555/-. The asserssee has however, shown salary and interest income in the return of income. These credit entries are not shown in the return of income. The AO, therefore, had reasoned to believe that income chargeable to tax has escaped assessment. The assessee in response to notice issued u/s 148 of the Act su....
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.... the process and methodology adopted by the assessee in earlier years also has judicial sanction because the peak statements were filed before the authorities below and the Tribunal also accepted the same while deciding appeals of the assessee for assessment years 2002-03, 2003-04 & 2004-05. The said orders of the Tribunal support, affirm and approve the methodology adopted by the assessee to determine the peak credit for the respective years and accordingly, there is no course legal, factual or any other logic reason to denote from the same. It was, therefore, submitted that AO should have adopted the calculation of the peak credit as is directed by the Tribunal in earlier year. 5. The Ld. CIT (A) confirmed the reopening of the assessment and dismissed this ground of appeal of the assessee. The Ld.CIT (A) as regards the working of the peak credit noted that the Tribunal has decided the issue in earlier year and have considered the method of working of the peak credit submitted by the assessee to the AO during assessment proceedings. The working of the peak credit, telescoping and set off all the entries and set off of the opening balances have been accepted. The Ld. CIT (A) forwa....
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....t the assessee in his working of peak had also considered the application of income and expenses in the rotation of funds as the cash available which is incorrect. The findings of the AO have been upheld by the CIT (A). Therefore, appeal of the assessee is not fully covered by decision of the ITAT. 9. Ld. DR submitted that the issue of reopening of the assessment u/s 148 of the Act is covered against the assessee by order of the Tribunal for earlier years (supra). Ld. DR referred to the statement of peak filed in the Paper Book to show that assessee has taken into consideration the expenses and interest which AO has excluded. Before the ITAT expenses were not referred, therefore, the AO may be directed to exclude the expenses while computing the peak. Set off of Rs. 46,16,387/- of AY 2003-04 is not available to assessee as it also contains the expenses. 10. On the other hand, Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that both the issues are covered by the order of the ITAT 'Delhi' Bench in the case of the assessee. He has submitted that the issue of peak is covered in favour of the assessee and assessee is entitled fo....
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....out the printouts it will be disastrous to add each and every entry without appreciating that same moneys have been reused. Such an arbitrary 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 ot....
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.... events reveals that assessees details are again not considered objectively and some prima facie adjustments are reduced by 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 h....
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.... as we have quashed the reassessment for AY 2001-02, therefore, the opening figure flowing 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 ....
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....ve agreed that issue regarding reopening of the assessment by issuance of a notice u/s 148 has been decided against the assessee in AYs 2002-03 and 2003-04, similar circumstances are available in this year, hence, ground no. 4 raised in the present appeal is to be rejected. Similarly it has been agreed that the entries found in the pen drive is admissible evidence against the assessee upon whom income of the assessee can be determined. Thus ground no. 2 raised by the assessee in the present appeal is also rejected. The following observations of the Tribunal in this connection are worth to note: 'AYs 2002-03 & 03-04 6.9. In these two assessment years the only challenge to jurisdiction to reassessment on the only ground about there being no live nexus between the reasons recorded and material available on record has been already dismissed by us. Consequently we proceed to decide the merits of the additions. 6.10. Reverting to the merits of the addition, department has consistently held that assessee manages wealth for other 148 persons. In this behalf some names of parties are here and there in the assessment order. However no enquiry from such parties have been solicited and f....
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....he income of AY 2003-04 determined at Rs. 92,7,077/- is to be excluded from the peak credit because this amount was available to the assessee on the first day of the accounting year. The Tribunal has made discussion with regard to this issue from Paragraph No. 6.13 which read as under: "6.13. We have heard both the parties on these issues at length most of the arguments are contained in the written submissions filed before lower authorities, which are mentioned above in brief From AO's remand reports and observations contained in the orders Id. AO and CIT(A), the details furnished by assessee are as under: (i) Assessee filed details about each and every entry on day to day basis, these details are placed on paper book of respective year. (ii) From the details a summary of mistakes, opening balances (debit or credit as the case may be), contra entries etc is furnished to work out the correct amount of credits emerging from the print outs. (iii) These details are further supported by working of peak credit for each year from, which are filed by assessee. 6.14. Assessee claims to have submitted all these details before AO, who though gave some cursory interest adjustment....
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....ndesirable and may impinge on principles of natural justice. The departmental theory of assessee being a fund manager for others is supported by the fact that assessee filed complete day to day details and entry by entry details of contents of print outs available with the department. They all are part of the paper books. They were submitted before Assessing officer and CIT(A). Remand report was submitted by AO on CIT(A) 's initiative. 6.19. From the explanation of the entries and departmental theory, it emerges that assessee was working as the fund manger or administrator for others. While dealing with the issue this fact is to be kept in reckoning. 6.20. Presumption u/s 292C will not be applicable in this case as admittedly there was no search proceedings under income tax act on the assessee. A statutory presumption can be raised against assessee when the prescription of law warrants it. Jn the absence of enabling statutory provision such presumption can not be propped up against assessee. Since there was no search on assessee u/s 132 under income tax act, presumption u/s 292C can be applied to him. However the assessee case comes in the ken of sec 68 about giving reasonable ....
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....rating from the details of entries that he manages the funds for others. In the course thereof he requests for necessary working of peak credit, correction of mistakes, contra entries and considering the claims of available opening balances. The claim of opening balances is made as the data recovered pertains to three years and assessees fund managing activities span to three years. Despite assessees diligence in filing all the details the authorities below fail to consider the assessee's objections and workings. In our considered view the facts and circumstances of the case and departmental theory warrant application of peak theory, telescoping, correction of mistakes and taking cognizance of journal/contra entries. In our view ratio of decisions in the cases of- Anantharam Veerasinghaiah & Co. (supra); K.S.M. Guruswamy Nadar & Sons (supra); Singhal Industrial Corpn. (supra); Kantilal & Bros, (supra); Sanjay Kumar Jain (supra); & Ishwardass Mutha (supra), support the assessee's case for peak credit and telescoping benefits. 6.25. In consideration of foregoings we have no hesitation to hold that assessee has discharged his primary burden in explaining the entries in terms of ....
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....o defend himself against the allegation including the cross-examination of Mr. Young and the result ofproceedings before the E.D. authorities are to be considered. This ground is set side restored back to the file of assessing officer to decide the same afresh in accordance with law. " 8. Respectfully following the order of the Co-ordinate Bench in the assessee's own case, where assessment was reopened on the similar reasons and same material i.e. credit entries pertaining to those years have been considered, we are of view that there is no disparity on facts, and, therefore, appeal of assessee deserve to be allowed for statistical purposes, we accordingly allow the appeal of assessee and direct the Ld. AO to verify the accounts and worked out the peak credit in accordance with the working made by the Tribunal in AY 2002-03 and 2003-04." 13.1 The assessee has filed statement of peak in the Paper Book from pages 15 to 75 of the Paper Book. The peak as on 10.04.2004 is calculated at Rs. 1,82,59,248/-. It is not in dispute that working of the peak for this year is same as have been computed by the assesse in preceding AY 2001-02 to 2004-05. 14. The Ld. CIT (DR), however, contended....