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TMI Blog2017 (9) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey when the questions were put to him more particularly questions No. 33 and 37 which reads as under:- 3. Thereafter, the tax was paid on 20th July, 2007 and even after one and half year, letter was not produced by the Department pursuant to the order passed on 21st April, 2017 which reads as under: "With a view to enable counsel for the appellant to produce on record the letter dated 30.12.2008. The file of Income Tax Appeal No. 36/2011 be tagged along with this appeal." 4. Mr. Singhi has taken us to the order of AO and contended that the AO while considering the matter has taken into consideration the statements recorded and the amount which was recovered was not of the respondent. The relevant part of order of AO reads as under:- "4. During the course of assessment proceedings the assessee furnished a letter dated 30.12.2008 which is reproduced below:- That a survey proceedings conducted u/s 133A in the case of company on 19.07.07 which was concluded on 20.07.07. During the course of survey proceedings, the statements of the directors of the assessee company were recorded. In these statements the director of the assessee company admitted an additional income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sh. Ajya Gangwal and therefore the assessee contention that there was no concealment of income is not correct. In this case, the additional income has been offered because of the survey conducted on 19.07.2007 wherein additional income was unearthed and therefore the assessee had concealed the particulars of its income and has furnished inaccurate particulars of its income. In view of this penalty procedings u/s 271(1)(c) of the I.T. Act are initiated separately. 5. Taking into consideration, he has assessed the income of the assessee as Rs. 1,82,00,000/- pursuant to the letter dated 30st December, 2008 same was never retracted by the assessee. The relevant part of letter dated 30.12.2008 is reproduced as under: "The revised computation of income is enclosed. Though no concealment of income is admitted however to purchases the peace and to honour, the commitment made by the directors of the assessee company the balance amount has been accepted as the income of the assessee company in addition to the income computed as per the computation of income. This amount has been work out on the basis of the figures informed by the department during the survey stated to have been not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,82,00,000/- is not based on any material found but the figure taken by the AO is an arbitrary figure. As it is admitted that the appellant and Sh. Ajay Gangwal were regularly dealing with each other, if credit entries are considered then debit entries also should be considered and similarly when cheque transactions have been accepted, cash entries should also be considered. A document should be read as a whole. In absence of any other evidence in respect of credit as well as debit entries appearing in seized papers peak credit theory which is an accepted accounting theory may be applied for addition. The fact that amounts were deposited and also withdrawn in short span of time indicates that same amounts were being rotated. The principle of peak credit is brought into service in case where there are several credit and debit entries in one cash credit account. To avoid multiple counting of the same sums, only the highest would be taken as unexplained deposit. As held by Hon'ble jurisdictional H.C. in the case of CIT vs. Tharyarmal Balchand (1987) 165 ITR 453 and Hon'ble Madras H.C. in the case of CIT vs. K.S.M. Guru Swamy Nadar & Sons 149 ITR 127 application of peak cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izure operation under Section 60 of DVAT Act to collect tax dues on the spot from the dealers whose premises are searched. This is wholly impermissible in law and will lead to unhealthy practice of arm-twisting a dealer into parting with alleged tax dues without there even being an order of assessment. The tax demand crystallises only upon an assessment. In any event, even if a dealer volunteers to deposit the disputed tax amount, he should be asked to deposit the said amount in the counter designated for that purpose. There is no question of the members of the search team collecting such payment. The CVAT should issue clear instructions in this regard. It should also be made clear that if any of the officers of the DT&T are found violating the instruction, they would be subject to disciplinary proceedings." 16. In that case again while directing the return of such cheques to the dealer from whom they were collected, the Court observed that "the VAT Authorities have in these cases proceeded on a basic misconception of the scope of their powers and authority." In para 52, the Court observed as under: "52. The Court would like to impress upon the CVAT that given the frequency wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notifications/circulars/instructions issued from time to time including those issued by the CBEC. There is no scope at all to collect duty and that too without even quantifying the extent of duty evasion. 20. The most glaring feature here is that when the note dated 14th March, 2017 was put up before the ADC, his three instructions were to "1. Release the cheques early" (which is a tacit acceptance of the practice of collection of undated cheques); "2. To quantify the statutory liability" (which is a clear admission that till then the duty was not quantified) and "3. To again put up the file as soon as the cheques are realised" (which is a clear admission of the fact that it is not known when that is going to happen). It is telltale that even after the Court issued notice to the Department in the present petition, the above instructions of the ADC have not been complied with. The undated cheques remained with the Department. What loss this entailed to the Government Exchequer is a different issue altogether. Then there is the loss of interest on the said amount. At least two scenarios are possible when such unbridled power of 'collection' of duty, on the spot, is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be sent forthwith to the Central Vigilance Commissioner (CVC) in view of the seriousness of the issue. The CVC will also be sent a copy of the judgment of this Court in Capri Bathaid Private Limited v. Commissioner of Trade & Taxes (supra). The CVC is probably aware that there is a pattern in several Departments of the Government which are entrusted with powers of collection of duties and taxes, and vested with search and seizure powers, resorting to such illegal practice of collecting cheques some time undated and some time even cash from persons and entities who may have evaded payment of taxes and duties. The extent of harm this can cause to the government exchequer and the harassment it can cause to innocent persons is immense. It symbolises what economists term as 'rent seeking behaviour' of public servants. It also raises serious issues about accountability and transparency of the functioning of these Departments. It is imperative for the CVC to issue clear guidelines." 9. We have heard learned counsel for the parties. 10. Before proceeding with the matter, it will not be out of place to mention that except the statement in the letter, the AO has no other mate ..... 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