2022 (7) TMI 673 - AT - Income Tax

Addition u/s 68 - benefit of peak credit - HELD THAT - We find from the said statement recorded on oath that the proprietor has also mentioned the dates and amounts on which the said money was advanced by the assessee and when the same was returned to assessee by Maladeep Construction - we find that this part of the statement of proprietor of Maladeep Construction also tally with the bank statement of assessee s account. Thus, following the principle for application of peak credit as laid down in D.K. GARG 2017 (8) TMI 450 - DELHI HIGH COURT we are of the considered view that the assessee is entitled to benefit of peak credit only in respect of this transaction, which is mentioned in statement of proprietor of Maladeep Construction and which also tallies with assessee s bank statement, since in respect of said transaction, linkage/chain of transaction through banking channel is evident and therefore, the assessing officer is directed to grant the benefit of peak credit to the assessee in respect of this transaction. In respect of other transactions in assessee s bank account, if the assessee is able to prove linkage/chain of transaction through banking channel then in respect of those transactions also, following the principle laid down by Hon ble Delhi High Court in aforesaid decision, benefit of peak credit should be granted to the assessee. With the above directions, we remand the matter to the assessing officer for de novo adjudication - assessee is directed to file necessary details in support of its claim of peak credit in respect of other transactions - As a result, grounds no. 4 and 5 raised in assessee s appeal are allowed for statistical purpose. Addition u/s 68 - accommodation entry receipts - HELD THAT - As in the present case, the assessee has not admitted itself to be an accommodation entry provider and has claimed itself to be an employee working in finance company having income from salary in addition to having the distribution agency and the fact whether any commission income was earned by the assessee is also not on record. Further, even before the lower authorities assessee has not claimed to have earned commission income. Thus, the petition seeking admission of additional ground filed by the assessee is rejected. From the perusal of profit and loss account of Rainbow Enterprises, forming part of the paper book, it is evident that the assessee was paid remuneration of Rs. 30,081 as partner and said amount was added as business income by the Assessing Officer. In view of the above, we do not find any infirmity in the impugned order passed by the learned CIT(A) upholding the aforesaid addition

Summary

Issues Involved:
1. Jurisdiction of the assessment order under Section 143(3) read with Section 147 of the Income Tax Act, 1961.
2. Addition of business receipts under Section 28 of the Act.
3. Addition of cash deposits under Section 68 of the Act.
4. Application of peak credit concept for additions under Section 68.
5. Non-adjudication of penalty proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessment Order:
The assessee contended that the assessment order passed under Section 143(3) read with Section 147 was without jurisdiction and bad in law. The CIT(A) dismissed this ground, stating that the assessment was validly reopened based on information received by the AO and that the defect fell under the purview of Section 292B of the Act. The Tribunal upheld the CIT(A)'s decision, noting that the AO had issued and served statutory notices properly, and the assessment was completed despite the assessee's failure to file a return in response to the notice under Section 148.

2. Addition of Business Receipts under Section 28:
The AO added Rs. 30,081 as business income, representing remuneration received by the assessee from the partnership firm, Rainbow Enterprises. The CIT(A) upheld this addition, and the Tribunal found no infirmity in the CIT(A)'s order, thus dismissing this ground of appeal.

3. Addition of Cash Deposits under Section 68:
The AO added Rs. 18,51,435 as unexplained cash deposits in the assessee's savings bank account. The assessee claimed these were business receipts from his distribution agencies and transactions done by a childhood friend on behalf of Maladeep Construction. The CIT(A) upheld the AO's addition due to the lack of documentary evidence and the denial of the statement by the proprietor of Maladeep Construction. The Tribunal noted contradictions in the statements and the lack of evidence supporting the assessee's claims, thus upholding the CIT(A)'s decision.

4. Application of Peak Credit Concept:
The assessee argued for the application of the peak credit concept for the additions under Section 68. The Tribunal, referring to the Delhi High Court's decision in CIT vs D.K. Garg, emphasized that the principle of peak credit requires a clear linkage of transactions through banking channels. The Tribunal directed the AO to grant the benefit of peak credit for transactions where such linkage is evident and remanded the matter for de novo adjudication. The assessee was instructed to provide necessary details to support the claim of peak credit for other transactions.

5. Non-adjudication of Penalty Proceedings under Section 271(1)(c):
The assessee raised a ground regarding the initiation of penalty proceedings under Section 271(1)(c), which the Tribunal dismissed as premature.

Additional Ground of Appeal:
The assessee sought to admit an additional ground of appeal, arguing that the addition under Section 68 was erroneous and that only commission income should be assessed. The Tribunal rejected this additional ground, noting the lack of facts on record to decide the issue and the absence of any claim by the assessee of being an accommodation entry provider or earning commission income.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the AO to reconsider the application of peak credit for certain transactions and dismissed other grounds raised by the assessee. The order was pronounced on 12/07/2022.