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TMI Blog2022 (7) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... d is adoption of peak credit theory and in this case, particularly peak credit theory is best method to determine undisclosed income of the assessee. The assessee has filed working of peak credit, which is available in paper book filed for relevant period. The assessee has copied entries contained in seized documents relied upon by the AO and recorded date-wise receipts and payments. For the financial year 2015-16 as on 23.03.2015, peak credit works out to Rs.36.25 lakhs, which is net of debit and credit entries recorded in seized document. Therefore, addition is required to be made to the extent of Rs.36.25 lakhs for the assessment year 2015- 16. Hence, we direct the Assessing Officer to sustain additions to the extent of Rs.36.25 lakhs for the assessment year 2015- 16 towards undisclosed income. The assessee has worked out peak credit of Rs.73.13 lakhs as on 25.03.2016 which is relevant to the assessment year 2016-17, on the basis of net of debit and credit entries from so called diary found during the course of search. Therefore, we direct the Assessing Officer to restrict addition to the extent of Rs.73.13 lakhs for the assessment year 2016-17 - Therefore, addition is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of self-quarantines which caused delay of 5 days. The delay in filing appeals is neither intentional nor willful but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. 3. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee does not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay and hence, appeals filed by the assessee may be dismissed as not maintainable. 4. Having heard both sides and considered the petition filed by the assessee for condonation of delay, we are of the considered view that reasons given by the assessee for not filing the appeals within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of appeals are condoned and appeals filed by the assessee are admitted for adjudication. 5. The assessee has more or less raised common grounds for all three assessment years, and therefore, for the sake of brevity, grounds of appeal filed for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings.. 13. The CIT(A) had erroneously assumed on probability of generation of cash in the appellant business without appreciating the control of Govt. over arrack shop in Pondiherryand Karaikal and reasoned upholding oforder of A0 on surmise. 14 The CIT (A) had failed to follow the various case laws as brought to his notice by the appellant during the course of appeal proceedings before him. 15. The CIT(A) erred in sustaining the addition made by AO in respect of Rs. 1,65,90,000/- based on loose sheets without any evidentiary value. The learned CIT(A) as well as AO had erred in concluding that the said amount represents income of the assessee without proper reason. 16.The CIT(A) had followed judicial cases which are different from facts and circumstances of the case of appellant. 17.Without prejudice to above grounds, appellant prays that Assessing Officer maybe directed to grant telescoping benefit of receipts and payments as indicated in seized material. 6. The brief facts of the case are that the assessee is engaged in the business of dealer in petrol pump and trading in liquor. The main business activity of the assessee is retail trade of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weeks from date of search, the assessee had filed a letter dated 18.06.2016 along with affidavit dated 04.08.2016 and retracted from his admission of additional income on the ground that admission was taken during the course of search by coercion, but not on the basis of any material found during the course of search. 7. Consequent to search, notice u/s.153A of the Income Tax Act, 1961 was issued. In response, the assessee filed his return of income on 10.08.2018 and declared total income, which was declared in the original return of income filed u/s.139(1) of the Act, without admitting any undisclosed income offered during the course of search. The case was taken up for scrutiny. During the course of assessment proceedings, the Assessing Officer has called upon the assessee to explain as to why undisclosed income offered during the course of search towards unaccounted income generated outside regular books of account should not be added to total income. In response to notice, the assessee vide his letter dated 26.10.2018 filed detailed written submissions on the issue and argued that admission taken during the course of search and the statement recorded u/s.132(4) of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat purported diary found during the course of search is nothing but a dumb document, which does not show any light on income earned from business outside books of account and spent for expenses. The assessee further contended the he is in the business of retail trading of country liquor and also dealer for Hindustan Petroleum Corporation Ltd., cannot generate so much unaccounted income, because these two trades are highly regulated by the Government. From the seized documents nothing can be made out whether any income is earned during the relevant period and if earned, from which source said income is earned. Similarly, nothing could be made out from document regarding expenditure incurred outside books of account. If you see document, stereotype recording is recorded whereby it recorded some figures in credit and some figures in debit and credit side says amount supply and debit side says amount paid . The Assessing Officer inferred that credit side amount supply means income earned, which is not disclosed in regular books of account and summed up and made additions for each assessment years. However, the Assessing Officer has conveniently ignored debit side of the amount paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and utilization of unaccounted income so generated as evidenced from seized materials. The assessee has explained modus operandi of generation of unaccounted income and has admitted additional income in the statement recorded u/s.132(4) of the Income Tax Act, 1961. The said admission has been reiterated in subsequent statement recorded u/s.132(4) of the Act. Although, the assessee has filed retraction along with affidavit, but could not prove filing of affidavit before the investigation officer, which is evidenced from fact that there is no signature or acknowledgement in the retraction letter filed by the assessee. Further, retraction filed by the assessee is an afterthought, because the assessee has clearly admitted undisclosed income, which is supported by material found during the course of search. Therefore, the learned CIT(A) opined that there is no merit in the arguments taken by the assessee that additions made by the Assessing Officer on the basis of admission is incorrect. The learned CIT(A) also discussed issue at length in light of various decisions, including decision of Hon'ble Jurisdictional High Court of Madras in the case of B.Kishore Kumar Vs. DCIT (supra) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obable that the assessee has earned so much unaccounted income from said business. Further, if you go through seized documents, nothing is specified regarding income expenditure. It is only the Assessing Officer has inferred that credit entry represents income, debit entry represents expenditure and both sides are outside regular books of account of the assessee, without specifying from which source the assessee has earned unaccounted income and what purpose the assessee has spent expenditure outside books of account. No doubt, one entry in the document pertains to cash paid to Mr.Santosh of NAC Jewellers Pvt. Ltd. for purchase of land, which was claims to have been paid on 27.05.2016 i.e., on the date of search. The cash paid to said party was also found in the premises and he had admitted fact that the assessee has paid cash. Except this, nothing is made out from the document that to whom said amount is paid. The Assessing Officer has simply ignored all debit entries and taken credit entries as unaccounted income and made additions for all three years. Therefore, the learned A.R submitted that first of all, there cannot be any additions on the basis of said document, because it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards undisclosed income earned for all three years and hence, their orders should be upheld. 13. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The facts borne out from records indicate that during the course of search on 26.5.2016 document called diary marked as ANN/KVK/NS/B D/S-2 (page 1 to 12) was found and seized, which contains some jottings date-wise with narration amount from supply for credit side and amount paid for debit side. The incriminating documents found during the course of search was extracted in para 8 of the assessment order. A statement u/s.132(4) of the Act was recorded from the assessee on the date of search and called upon the assessee to explain contents recorded in the seized documents. In response to specific question, the assessee claims to have admitted earning unaccounted income and spending for expenditure outside regular books of account for three assessment years. The Assessing Officer, on the basis of admission of the assessee in the statement recorded u/s.132(4) of the Income Tax Act, 1961, come to the conclusion that the assessee had earned unaccounted income which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in three assessment years is matching with purchases reported in Form 26AS. The Assessing Officer has not brought on record any evidence of sales outside regular books of account, in fact except so called diary no evidence was with the Assessing Officer to allege that the assessee has made sales outside regular books of account. Therefore, from the above, it is very clear that from retail trading of country liquor, possibility of generating unaccounted income is highly improbable. As regards retail trading of diesel and petrol, the assessee is a dealer for Hindustan Petroleum Corporation Ltd. The dealership of oil marketing companies is highly regulated, where dealers will get nominal amount of commission on sales made. The question of generation of unaccounted income from dealership of oil marketing companies is highly improbable. Once again, the assessee has maintained regular books of account which was audited by an Accountant. The Assessing Officer does not make out any discrepancy in books of account nor does the Auditor have reported any adverse comments in the books of account of the assessee. From the above, it is very clear that from the business of dealer of Hindustan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, there is no need to go into verification of documents, because admission is sufficient to make addition. We have gone through decision relied upon by the Assessing Officer. No doubt, the Hon ble Madras High Court has come to the conclusion that once there is voluntary admission from the assessee in the sworn statement recorded u/s.132(4) of the Act, same needs to be taxed, on the peculiar facts of that case, where the assessee has given admission towards undisclosed income which is supported by incriminating documents found during the course of search. Further, the assessee has not retracted from his admission, however, contested the issue only during the course of assessment proceedings. Under those facts, the Hon ble High Court came to the conclusion that admission in the statement is sufficient to make additions, unless contrary evidence leads to take different view. In this context, it is worthwhile to refer to decision of the Hon ble Supreme Court in the case of M/s. Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala (1973) 91 ITR 18, wherein the Hon ble Supreme Court has laid down proposition that an admission is extremely important piece of evidence, but it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is recorded in the seized document shows unaccounted income earned by the assessee from his business. As we have noted already in our order, document relied upon by the Assessing Officer is nothing but dumb document, which does not show any light on financial transactions of the assessee, be it income earned from undisclosed source or expenditure incurred outside regular books of account. The jottings recorded in the so called diary does not show anything about income from whom said income is earned or source from which said income is earned or expenditure incurred outside regular books of account. Therefore, on the basis of said document additions made by the Assessing Officer is highly incorrect. Further, the assessee has filed retraction immediately 15 days after date of search along with affidavit and stated that admission taken during the course of search is by coercion and undue influence, but not based on evidences gathered during the course of search. In the retraction letter dated 18.06.2016 and affidavit dated 04.08.2016, the assessee has explained manner in which statement was recorded u/s.132(4) of the Act, and said letter was filed before the investigation officer, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ignored those entries on the ground that said entries pertain to expenditure incurred outside regular books of account, although, there is no narration with regard to nature of entry and to whom said amount is paid. It is well established principle of law by the decisions of the courts and the tribunals that when something is recorded in the seized documents, be it income or expenditure, both needs to be considered for the purpose of taxation and this principle is supported by the decision of the ITAT., Mumbai in the case of Pooja Bhatt Vs. ACIT (supra), where the Tribunal held that expenses eligible for deduction in the seized document should be considered while arriving at net income. 19. In this case, the Assessing Officer has admitted that what was recorded in the seized document towards debit side is expenditure outside regular books of account, although nature of said expenditure is not known to the assessee as well as the Assessing Officer. Therefore, we are of the considered view that when the Assessing Officer has taken credit entries as income of the assessee earned from undisclosed source of income, he ought to have considered debit side of entries as expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were found and seized from the residential premises of Mr.S.Vasudevan, which contains details of cash receipts and corresponding cash payment. During the course of assessment proceedings, the assessee was asked to explain contents of the loose sheets along with supporting documentary evidence. In response, the assessee filed a reply dated 28.12.2018 and furnished details with regard to seized documents and explained that these cash receipts are pertain to income generated from his proprietary concern M/s. Natesan Agenices and same was duly accounted for in the regular books of account amounting to Rs.50,40,000/-. In respect of other entries, like amount in the name of Mr.N. Palaniswamy, M/s. Pearl Transport, Mr. TNJ Natarajan and M/s. M.S.Wines amounting to Rs.1,65,90,000/-. The assessee could not explain nature and source. Therefore, the Assessing Officer has made additions as unaccounted income. 21. We have heard both the parties and considered relevant materials on record. Even before us, except entry in the name of M/s. Natesh Agencies amounting to Rs.50,40,000/-, the assessee could not explain other entries in the name of P.Palaniswamy for Rs.61,00,000/- M/s.Pearl Transp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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