TaxTMI 
TaxTMI 
2018 (9) TMI 1301
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....he Income Tax Act, 1961 on 27.10.2005 showing total income of Rs. 20,94,725/-. Notice under section 148 was issued on 29.03.2012 after recording the following reasons: "A search, operation was carried out by the Punjab Vigilance Bureau on 17.05.2007 in the case of Sh. Chetan Gupta at his business premises situated at 118, Ansal Bhawan, K. G. Marg, New Delhi. During search, a Pen-drive was found from the possession of Sh. Chetan Gupta, who is one of the Directors of Assessee-Company. In the said pen-drive, ledger accounts of different parties were found to be maintained by Sh. Chetan Gupta. Printouts of the year-wise ledger accounts had been taken by the Punjab Vigilance Bureau from the Pen-drive and were sent to the Income Tax Department. It has been alleged by the Punjab Vigilance Bureau that Sh. Chetan Gupta was keeping the black money earned by Capt. Amrinder Singh, Ex. Chief Minister of Punjab and keeping the record in computerized data stored in Pendrive. 2. As per information available in this office, the assessee during the relevant previous year entered into financial transactions of expenditure and investments which were apparently not entered in the book....
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....ooks of account. Therefore, entries contained in the pen-drive cannot be made basis for addition against the assessee-company. The A.O. considered the reply of the assessee-company and noted some entries relating to Shri Chetan Gupta's five companies/ firms were found on both the pen-drive and in the fair books of account of Shri Chetan Gupta. The accounts in the pen-drive were maintained like the normal books of account. Shri Chetan Gupta has given cheque of Rs. 2 crores to Shri Gurpal Singh, son-in-law of Capt. Amrinder Singh and it was found that these cheques had been issued from his companies RL Travel, Indo Arab Services and Trans Air in October, 2005. This money was subsequently returned by Shri Gurpal Singh to Shri Chetan Gupta in January, 2006. Assessee's denial is, therefore, not justified. The A.O. considered the issue in the light of provisions of Section 68 of the I.T. Act and noted that working of the peak credit prepared by the A.O. as per entries in the pen-drive comes to Rs. 2,21,00,788/-. It was added as unexplained credit in the hands of the assessee-company under section 68 of the I.T. Act. 3. The assessee-company challenged the initiation of re-assessment pr....
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....-company and dismissed the appeal of assessee-company. The Ld. CIT(A) noted that the amount clearly represents the expenses incurred by the assessee-company as recorded in the pendrive of its Director, therefore, addition is liable to be made under section 69C of the I.T. Act. No addition could be made under section 68 of the I.T. Act. He has also considered the decision of ITAT in the case of Shri Chetan Gupta for A.Ys.2002-2003, 2003-2004 and 2004-2005 and noted that there is a live nexus established between assessee-company and the contents of the pen-drive. Therefore, addition under section 69C was made by the Ld. CIT(A). As regards reopening of the assessment, Ld. CIT(A) noted that A.O. has to come to the prima facie conclusion that there was escapement of income, therefore, re-assessment is justified in the matter. Appeal of assessee-company was accordingly dismissed. 5. We have heard the Learned Representatives of both the parties and perused the material available on record. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that the issue on merit is covered by the Order of ITAT, Delhi F-Bench, in the case of Shri....
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....ed fact that alleged pen-drive was recovered during the search from the possession of Shri Chetan Gupta by Punjab Vigilence Bureau on the reasons that Shri Chetan Gupta was keeping the black money earned by Capt. Amarinder Singh, Chief Minister of Punjab. The Department has also proceeded against Shri Chetan Gupta in various assessment years on the basis of the entries contained in the pen-drive recovered from him. The Tribunal decided several appeals of Shri Chetan Gupta and finally the appeal of Shri Chetan Gupta was decided by ITAT, Delhi F-Bench, in ITA.Nos.1788 & 2389/Del./2016 for the A.Y. 2005-2006 vide Order dated 07.06.2018 and in paras 3 to 16 it was held as under : "3. Brief facts of the case are that assessee is an individual filed his return of income u/s 139 of the Income Tax Act, 1961 (hereinafter for short called as the 'Act') on 29.10.2005 declaring total income of Rs. 3,41,612/-. The AO issued notice u/s 148 of the Act after recording the reasons. The reasons are reproduced in the assessment order in which it is noted that Punjab State Vigilance Bureau has conducted a search operation on 17.05.2007 at the business as well as the residential premises of th....
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....pen-drive does not belong to him was rejected. The AO also prepared working of the peak credit and mentioned at pages 7 to 10 of the assessment order and the total of the same comes to Rs. 43,67,62,555/- which was treated as unexplained credit and addition was made to the income of the assessee. 4. The assessee challenged the addition before the Ld. CIT (A) as well as challenged the reopening of the assessment in the matter. The submissions of the assessee are reproduced in the appellate order in which the assessee explained that the ITAT had decided the case of the assessee for earlier assessment years i.e. 2001-02, 2002-03 & 2003-04, wherein the assessee has been granted the benefit of calculation of peak balance and telescoping thereof in the manner discussed above. Keeping the said decision in view, the addition, if any, at all has to be limited to the peak credit of Rs. 1,82,59,348/- as on 10.04.2004 as telescope for the maximum peak balance of earlier years i.e. Rs. 46,16,837/- for AY 2003- 04 resulting in net addition, if at all, of Rs. 1,36,42,861/-. The assessee also made submissions against reopening of the assessment. The assessee in the rejoinder also explained....
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.... of the assessment u/s 148 of the Act. The Revenue in their appeal challenged the deletion of addition of Rs. 38,57,10,583/- on account of unexplained credit u/s 68 of the Act. 7. We have heard the Ld. Representatives of both the parties. 8. Ld. DR relied upon the order of the AO and submitted that pen-drive was seized by the Punjab Vigilance Bureau from the possession of the assessee on the basis of which AO made an addition of peak amount of credit u/s 68 of the Act. The CIT (A) directed the set off of opening balance of cash available against the said peak credit. The AO had worked out the peak of individual ledger account while the assessee consolidated all the accounts in the working of the peak. The ITAT decided the appeals for assessment years 2001-02 to 2004-05 in which the working of the peak as per assessee has been accepted and set off has been given of the opening balance. The orders of the Tribunal dated 21.06.2013 and 31.01.2014 are filed in the Paper Book. For AY 2005-06 the order of the CIT (A) is dated 23.02.2016 on the basis of the remand report dated 22.01.2016 and both the dates are subsequent to the order of the Tribunal in earlier years. The ....
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....T(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 adjustments but did not look into all other details refusing the assessee claims summarily. They were filed before CIT(A) again who called for remand report, however CIT(A) also did not deal with the core issue and gave some adjustments here and there. Thus assessment has not been framed in a reasonable and proper manner. To ensure high pitched assessments the huge additions have been made one way or other in a capricious manner. 6.15. Ld counsel took us through the relevant entries to demonstrate how the funds have been reutilized f....
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...., 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. In 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 explanation of cash credits found from his record. 6.21. This scenario does not alter the situation materially in as much as assessee has to discharged the burden cast by deeming fiction of sec. 68. The burden is by and large similar to sec 292C. 6.22. The department proceeds on premise that assessee manages funds for 148 person or so and keeps a record thereof. Assessee filed every detail in date wise and entry wise manner. AO does not consider it objectively and allows some c....
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....ider 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 sec. 68 or any other presumption which may be raised in behalf of the entries in the print outs. Department in effective and convincing terms has failed to rebut the same except giving some general observations that the claims can not be considered. In our view we have to estimate the undisclosed income of the assessee for AYs2002-03 & 03-04 keeping in mind our observations and conclusions in this behalf. 6.26. In the wake of these observation we procee....
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....le consideration has been received by the assessee through a registered sale deed. There is no allegation about violation of any circle rate or comparative sale instance. The purchaser of the property has not been examined so as to raise any doubt about any on money received by the assessee. In our view when a property is sold by a registered document, the addition cannot be made purely on the basis of a valuation report which is only in the nature of an opinion. CIT(A) while deleting the addition, has rightly relied on the Hon'ble Delhi High Court judgment in the case of CIT. In view thereof we do not find any infirmity in the order of CIT(A), which is upheld. 9.1. Since we have disposed of the assessee's appeals in above manner, there is no need to deal with the assessee's ground about additional evidence. 10. In the result, revenue's appeal is dismissed. 11. In the result, assessee's appeal for A.Y. 2001-02 is allowed; for A.Y. 2002-03 & 2003-04 are partly allowed. Revenue's appeal for AY 2002-03 is dismissed." 13. The ITAT 'B' Bench Delhi in the case of the same assessee for AY 2004-05, vide order dated 31.01.2014 following its earlier order ....
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....upported 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 guise of a fiction of presumption u/s 292C all the funds are being treated as owned by the assessee and on top of that proper adjustments of peak credit emerging from the pen-drive is being refused to be worked by the department. That apart the other logical claims of set off role over, correction of mistakes and credit of opening balances which are emerging from the same contents i.e. print outs of pen-drive is not being allowed to assessee. The assessment of undisclosed income is thus arbitrary and patently against the settled judicial propositions and departments own way of working in other survey, search or reassessment cases in ....
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....ble 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 working out of seized and incriminating documents....
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....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 has discharged....
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....uashed 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 AY 2003-04 Rs. 46,16,387/- ii) Less: Peak credit for AY 02-03 Rs. 36,89,310/- Taxable income for AY 03-04 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 his back. Asse....
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....ethodology adopted by the assessee in earlier years have been accepted by the ITAT in two orders for assessment years 2001-02 to 2004-05. Therefore, the authorities below are bound to follow the orders of the Tribunal and should not have reworked out the peak in their own way. Since the peak credit statement is prepared by the assessee on the basis of the entries found in the pen-drive and accepted by the Tribunal in earlier years, therefore, same method shall have to be followed in assessment year under appeal. Therefore, there was no justification for the AO to substitute the peak for assessment year under appeal from Rs. 1,82,59,248/- to Rs. 5,10,51,972/-. The assesse's counsel has also rightly contended that the Tribunal has given benefit of opening balance of the earlier years and that assessee had paid tax on the peak credit for AY 2003-04 of Rs. 46,16,387/-. Therefore, such amount shall have to be reduced from the peak calculated by the assessee and benefit of the same shall have to be granted to the assessee. Therefore, as per the decisions of the Tribunal in the case of the assessee reproduced above, the net addition shall have to be made against the assessee in a sum of R....
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....s regard. Ld. CIT(A) in the case of the assessee-company for A.Y. 2007-2008 vide Order dated 23.02.2016 following the Order in the case of Shri Chetan Gupta deleted the entire addition. The ITAT, Delhi F-Bench also in the case of sister concern of the assessee-company R.L. Agencies Pvt. Ltd., (supra) on identical issue following the Order in the case of Shri Chetan Gupta (supra), deleted similar addition. These facts clearly prove and establish that assessee-company has no connection with the entries contained in the pen-drive. The print-out of the pendrive was brought on record which was unsigned. No name of the assessee-company is mentioned. Therefore, it was having no evidentiary value to make any addition against the assessee-company. The issue is, therefore, covered by the Order of the ITAT, Delhi Bench in the case of Shri Chetan Gupta (supra) and others. We, therefore, hold that no addition could be made against the assessee-company. We, accordingly, set aside the orders of the authorities below and delete the addition of Rs. 2,21,00,788/-. 7.2. The A.O. recorded reasons for reopening of the assessment on the basis of pen-drive found from the possession of Shri Chetan Gupt....