TaxTMI 
TaxTMI 
2025 (3) TMI 2219
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....her on the facts and circumstances of the case the Ld. CIT(A) has erred in directing the AO to delete the addition made u/s. 68 and restricting the unexplained expenditure u/s. 69C without taking into consideration the fact that the assessee had failed to provide any cogent explanation/ material with respect to the same during the assessment proceedings". Ii. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in applying the Peak Credit Theory without considering the fact that the assessee had failed to provide an explanation as to how the expenditure incurred was for the purpose of its business and hence was directly linked to its income". 2.1 The grounds raised by the assessee in its cross-objection are reproduced as under: 1. The notice u/s. 153A of the Act dated 28.06.2021 is without jurisdiction, non-cst. invalid and bad in law. 2. The order u/s. 143(3) r.w.s 153A of the Act dated 51.03.2022 is non-est. invalid and bad in law. 3. The Ld. CIT(A) erred in law & facts in not appreciating [hat addition in respect of the documents (bund at the premise of Shri. Vinod Kumar Sharma was warranted in the case of the appella....
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....Year Amount A.Y. 2020-21 98,45,506/- With regards to the issue related to unexplained receipts, a perusal from the material placed on record, it is observed that as per AO, out of the total seized loose papers by NCB, following documents in respect of receipt vouchers, represent unexplained receipts of the appellant :- Assessment Year Document ref no. Aggregate Amount (in Rs. ) A.Y. 2020-21 D-47, D-57, D-55, D- 58, D12, D-45, D-48, D-49, D-50, D-66, D-61, D-46 D- 60 1,31,15,474/- Total 1,31,15,474/- 6.3 The AO, during the course of assessment, .had called for the cash book, bank book and financial statements of the appellant, invoices raised to the different parties by the assessee related to impounded documents D-l to D-97. In response to the same, the appellant had submitted the cash book of itself as well as that of M/s, Westfin International Put- Ltd. and claimed that the bills / invoices related to cash receipts vouchers were raised by M/s. Westfin International Put. Ltd. (sister concern of assessee) to its clients and said cash vouchers were related to receipts of amounts which were already credited in the banks of M/ s. West....
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....e/ corroborative material, the same cannot be considered a genuine explanation. 6.6 In view of above, I find no infirmity in the observations of AO with regards to the cash receipt vouchers referred to in para 6.2 above and therefore the AO has rightly held that the same represents unexplained business receipts of the appellant for A.Y. 2020-21. 4.2 Thereafter, in respect of vouchers of the expenditure, the Ld. CIT(A) found the expenditure to the extent of Rs. 25,94,699/- as explained and addition for the balance expenditure of Rs. 1,40,92,307/- was sustained subject to peak credit. The relevant paragraphs of the impugned order are reproduced as under: 6.7 Further, with respect to the issue relating to unexplained expenditure, a perusal from the material placed on record, it is observed that as per AO, out of the total seized loose papers by NCB, following documents in respect of represent unexplained expenditure of the appellant :- Assessment year Document ref no. Aggregate Amount In Rs.) A.Y. 2020-21 D-13,D-16,D-17,D-18, 0-19, D-20, 0-25, D-29, 0-32, D-33, D-34, D-35, D-37, D-40, D-41, D-42, D-43, D-44, D-14, D-24, D-26, D-27, 0-28, D-30, D-67,....
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.... to the source of said expenditure incurred by the appellant, the appellant has submitted that the source of said expenditure was cash receipts in the ordinary course of appellant's business and which were already recorded in cash book of the appellant and also offered to tax. On detailed perusal of the cash book of the appellant and details of sales of the appellant, the contention of the appellant is found to be correct. Further, with respect to the cash voucher D-67, the description of said voucher states that the payment of Rs. 5,00,000/- was made to one M/s. Vanilla Food Products Put. Ltd. The assessee has explained that the said payment was made by M/s. Westfin International Put. Ltd through banking channels and had also submitted extract of bank statement of M/s. Westfin in this regard. Further, with respect to D-21, the appellant has explained that Rs. 1,82,000/- was paid in cash by the appellant Rs. 1,18,000/- was paid by M/s. Westfin International Put. Ltd. and Rs. 5,00,000/- represents exchange value of old machinery. In this regard, the appellant has submitted the copy of cash book of appellant and bank statement of M/s. Westfin to establish the above facts. ....
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....Sampath Iyengar's Law of Income-tax, Vol .- 3, 9th edition, page 3547. Accordingly, "Peak credit theory" - One of the commonest defects of an assessee, where a single credit or number of credits appear in the books in the account of any particular person side by side with a number of debits is that they should all be arranged in serial order, that a credit following a debit entry should be treated as referable to the latter to the extent possible and that, not the aggregate but only the "peak" of the credit should be treated as own explained. To, give a simple example, suppose there are credits in the assessee's book in the account. A or Rs. 5,000 each on] October, 1990 and again on 5th November, 1990 but there is a debit by way of repayment shown on 27th October, 1990, the explanation will be that the credit appearing on 5th November, 1981 has or could have come out of the withdrawal/repayment on 27th October, 1981. This plea is generally as it is logical and acceptable (whether the creditor is a genuine party or not), provided there is nothing in the material on record to show that a particular withdrawal/ repayment could not have been available on the date of the subsequ....
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....ture in chronological sequence and after inclusion of entry of 'Unexplained Introduction le aggregating to Rs. 9,76,833/- (Rs. 9,00,000/- during F.Y. 2018-19 plus-i Rs. 76,833/- during F.Y, 2021-22) whenever the unexplained receipts. Sell short of unexplained expenditure, the total clos closing balance comes to 'Nil'. 6.21 Therefore, applying the above concept of 'Peak Credit', this 'Unexplained Introduction' aggregating to Rs. 9,76,833/- actually represents the excess of total unexplained expenditure of Rs. 1,40,92,307/- over and above the total unexplained receipts of Rs. 1,31,15,474/- which ultimately represents the actual net unexplained expenditure incurred by the appellant during the period from F.Y. 2018-19 'to F.Y. 2020-21 relevant to A.Y. 2019-20 to A.Y. 2021-22, 6.22 Therefore, after applying the concept of 'Peak Credit1 in the current case and relying on the various applicable judicial precedents, the aggregate amount of net unexplained expenditure of Rs. 9,76,833/- shall be taxed u/s. 69C of the Act as under :- Assessment Year Amount of addition u/s. 69C of the Act A.Y. 2019-20 Rs. 9,00,000 A.Y. 2020-2....
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....ent year 2020-21, the grounds raised in the appeal of the Revenue for assessment year 2021-22 are allowed for statistical purposes whereas grounds raised in the cross-objection by the assessee are dismissed. 8. In the result, the appeals of the Revenue for both the assessment years are allowed for statistical purposes whereas the cross-objection of the assessee for both the assessment years are dismissed. Order pronounced in the open Court on 26/03/2025. ============= Document 1 ASmenERA NCB Seizure rel 20 Date on voucher FY YCzne Do doc Opening balance Receipts [in Rs] Paymentja Rx.] Cesing balans Unexplained Introduction 15,00,000.00 . 9,00,000 00 0-43 30-04-2011 2018-19 Acl nehod 9,00,000.00 . 9,00,000.00 . 0-66 23-08-2015 2015-20 Cot: . 4,10,500.00 . 4,10,500.00 0-74 23-08-2023/2019-20 899 Vinod Kumar Sharma 4,10,500.00 3,29,500:00 $1,000.00 0-50 23-10-2015 2019-201902 Seyni Harzuza 81,000.00 10,00,000.00 . 10,81,000.00 0-50 23-10-2025 Seyni Harzuna 10,81,000.00 32,17,879.00 . 42,51,875.00 0-61 18-11-2025/2015-2016 Doeka chi/ Borkin 42,98,879.00 4,61,500.00 . 47,50,379.00 0-30 28-11-2019 2019-20-30% Mr. Bonkin 47,50,379.DO 5,83,087.00 41,77,29....