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TMI Blog2017 (6) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... hn Vincent Donkupar Langstich, CIT, DR ORDER Per Shri A.T.Varkey, JM 1. These are appeals of the assessee and the Revenue against the order of Ld. CIT(A), Central-II, Kolkata dated 23.10.2012 which is a combined order for AY 2008- 09, 2009-10 and 2010-11 and the Cross Objection by the assessee in support of the decision of relief given to him and also against the claim made on addition based on peak credit. 2. The assessee s appeal in ITA No. 832/Kol/2013 for AY 2008-09 is time barred by 47 days and assessee has filed a condonation petition stating the reasons for the delay and prayed before the bench to condone the delay. Ld. DR has not objected to this prayer of the assessee and since the Ld. DR has given concession to condone the delay, we condone the delay and admit the appeal for hearing. 3. In all appeals, the assessee has raised the 1st, 2nd and 3rd grounds against the legal validity of proceedings initiated u/s. 153C of the Act which has not been pressed before us, therefore, we dismiss the same as not pressed. 4. The ground no. 4 of assessee s appeal is against the addition of ₹ 38,64,870/- as peak credit in AY 2008-09; whereas the revenue s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and thereafter, the AO brought the peak credit deposit in the 32 bank accounts in a chart form for AY 2007-08 to 2009-10 as given below: FINANCIAL YEAR DATE Peak Deposit during the year 2007-08 07.03.2008 3,264,870.00 2008-09 14.02.2009 12,997,672.36 2009-10 20.12.2009 26,022,588.20 Total : 42,285,130.36 And thereafter, the AO treated the said amounts as undisclosed income of the assessee. On appeal when the assessee challenged the addition made of the said amount (Rs.34,64,870/-) for AY 2008-09 as peak credit, the Ld. CIT(A) did not accept the contention of the assessee and was pleased to confirm the peak credit of ₹ 34,64,870/- for AY 2008-09. However, gave partial relief to the assessee by giving the benefit of telescoping of income assessed in the AY 2008-09 to the peak credits for AY 2009-10 and 2010-11. Thus, the Ld. CIT(A) confirmed the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission earned @ 0.25% on the quantum of cash deposits made in all the bank accounts found during the course of search. Therefore, according to the Ld. AR, once the AO has accepted the factual explanation of the assessee that the money deposited in the bank accounts belonged to others and he was merely a name lender and for which commission was charged, then, according to the Ld. AR, principle of applying the peak credit to fasten the liability on the assessee is patently wrong. According to the Ld. AR, the principle of peak credit proceeds on the fundamental premise that the money deposited and/or withdrawn from the assessee s bank account belongs to the assessee or in respect of which ownership vest in the assessee. Therefore, according to the Ld. AR, ownership of the fund is a pre condition for invoking the principle of peak credit theory and, therefore, unless the AO makes a factual finding that the assessee himself was the owner of the money, theory of peak credit cannot be applied. It was brought to our notice that admittedly, the AO has made addition on account of commission derived by the assessee from his name lending activity and such commission income has been worked ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of ₹ 3,50,320/- , for AY 2009- 10 returned income of ₹ 2,38,820/- and for AY 2010-11 the returned income of ₹ 3,28,430/-. However, the AO noted in para VI that the Ld. AR of the assessee during the assessment proceedings submitted a revised computation (NOT REVISED RETURN) on 13.12.2011 showing undisclosed income based on the peak credit balance in 38 bank accounts controlled by the assessee and has given in chart from which has been reproduced above, working out a total peak deposit to come to ₹ 4,22,85,130/-. When the Bench asked the Ld. AR to explain the observation of the AO, the Ld. AR submitted that during the assessment proceedings the AO asked the assessee to work out the peak credit deposited in the 38 bank accounts. According to the Ld. AR, when the AO insisted, the assessee had no other option but to compute the peak credit deposited in the bank accounts and placed before him the peak credit deposit in the 38 bank accounts. According to Ld. AR, the working of peak credit placed before the AO which is the peak credit deposited in the bank accounts cannot be termed as undisclosed income of the assessee unless there is a finding of fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him during his business activity of name lending (accommodation entry) is correct. However, during the assessment proceedings the AO insisted the Ld. AR of the assessee to work out the peak credit deposited in various bank accounts, so he worked out the same and produced it before the AO, which have been added as his income is patently wrong because the money deposited in the bank account belongs to third parties and not his. 10. The principle of peak credit theory stems on the fundamental premise that the money deposited and/or withdrawn from the assessee s bank account belongs to the appellant/assessee or in respect of which ownership vest in the appellant/assessee. So, in other words, ownership of the funds is the sine qua non for invoking the principle of peak credit and this particular principle of peak credit theory has been reiterated by the Hon ble Allahabad High Court in the case of Bhaiyalal Shyam Behari Vs. CIT (2005) 276 ITR 38 (All) wherein it was reiterated that for adjudicating upon the peak credit the factual foundation has to be led that the assessee has to own all cash credit entries in the books of account and only thereafter the question of peak credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Calcutta. The Hon ble High court upheld the aforesaid order of the CIT in GA No. 998 of 2016 and connected matters i.e. M/s. Pragati Financial Management Pvt. Ltd. Vs. CIT-II dated 07.03.2017. From the aforesaid order of Hon ble Calcutta High Court it transpires that the AO was duty bound to find out the real beneficiaries who were rotating money through the assessee s beneficiaries concerns rather doing that AO has simply made additions based on peak credit and commission earned for providing accommodation entry. We take note that assessee s return in pursuance of the notice under section 153C of the Act was to the tune of ₹ 3,50,320/- for AY 2008-09 and ₹ 2,38,820/- for AY 2009-10 and ₹ 3,28,430/- for Ay 2010-11. However, during the assessment proceeding the AO has directed the assessee s AR to prepare the peak credit of the amounts deposited in all the bank accounts and then made addition which is per se unsustainable in law in the facts and circumstances of the case because there is no iota of evidence to suggest that the amounts of money deposited in all the bank accounts owned/belonged to the assessee, without which the theory of peak credit additi ..... 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