Dr. Murari Mohan Koley, Kolkata vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA [Before Shri Mahavir Singh, JM & Shri B. P. Jain, AM]

I.T.A. No.1404/Kol/2014 Assessment Year: 2008-09 Dr. Murari Mohan Koley, vs. Income Tax Officer, Ward-55(3), 114/4/1A, Tollygunge Road. 54, Rafi Ahmed Kidwai Road Kolkata - 700 033 Kolkata - 700 016 (PAN: AFRPK 1976K) (Appellant) (Respondent)

Date of hearing: 24.04.2015 Date of pronouncement: 13.05.2015

For the Appellant: Shri S.M. Surana, Advocate For the Respondent: Shri K.L. Kanak, JCIT

ORDER Per Shri Mahavir Singh, JM:

This appeal by assessee is arising out of order of CIT(A)-XXXVI, Kolkata in Appeal No. 393/CIT(A)-XXXVI/Kol/Wd.-55(3)/Set aside/10-11 dated 21.03.2014. Assessment was framed by ITO Ward-55(3) Kolkata u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 vide his order dated 20.12.2010.

2. The sole issue in this appeal of assessee is against the order of CIT(A) in not considering the peak credit. For this, assessee has raised following effective grounds No. 2 and 3:-

"2. For that on the facts and circumstances of the case the Ld. CIT(A) erred in confirming the assessment order which was passed in gross violation of principals of natural justice.

3. For that on the facts and circumstances of the case the Ld. CIT(A) erred in confirming the addition of Rs.28,51,250/- being the entire gross sum deposited in the Bank Account with Axis Bank and should have accepted the claim of the assessee for making the addition by allowing peak credit ignoring the explanation filed by the assessee particularly when there was no evidence o suggest that the appellant made investment out of the cash withdrawals made from the same bank."

2 ITA No.1404/K/2014 Dr. Murari Mohan Koley AY 2008-09

3. Briefly stated facts are that the Department received AIR information in respect of substantial deposits in Axis Bank Howrah. According to Revenue which was not accounted for, initially assessee given explanation that the bank account was held jointly with his wife and amount deposited therein are gifts received from his father-in-law. Assessing Officer during the course of assessment proceedings asked the assessee to explain the deposits and consequently summons were issued to the father-in-law of assessee. Ultimately, assessee agreed that same belonged to him and he has to explain. Even now before us, assessee stated that this asking for peak credit only. Ld. counsel for the assessee drew our attention to para 8.1 to 8.4 and 8.6 of order of CIT(A), which read as under:-

"8.1 PEAK CREDIT The alternate plea of the assessee that only Peak Credit is to be assessed is taken into consideration. In this context the following is submitted. Peak Credit is not a proposition of law. They are only inferences to be drawn from normal probability, which can be displaced by any material pointing to the contrary. Peak credit theory is applied when withdrawal can explain subsequent deposit which in turn can explain subsequent withdrawal and so on. This normally happens in the case of traders having unaccounted purchase and sales. Peak Credit method cannot be adopted when withdrawals is for making investment or personal expenses. This view is supported by the decision of the Hon'ble ITAST, Kolkata in the case of Uday Shankar Mahowar vs. ITO, Kolkata, ITA No. 1903/Kol/2009.

8.2 On examination of bank account, it is seen that withdrawal is for making investment in Sahara India Ltd, payment to stock broker, Investment in Bajaj Allianz, Investment in MPS Greenery Developers deposit, Investment in Mutual funds, application in public issue of shares, payment to stock broker Ashika Stock Broking Ltd, Insurance Policy with United India Insurance, etc., Further as was pointed out in show cause notice, cash withdrawal is scattered over the year in different ATM's in small amounts on different dates, clearly. Indicating that the withdrawal was for personal expenditure. Most of the withdrawal is by cheque which were issued to different persons as is evident from deposit and withdrawal slips. Assessee was not a trader but a reputed doctor, who would not withdraw for business purposes only to deposit after some time in the same account. The nature of withdrawal clearly indicate that they were for personal expenditure only. Besides there is evidence of incurring various expenditures through bank account, i.e. payment for telephone expenses, medical expenses. All these taken together clearly indicate that since the withdrawals were primarily for investments and few for personal expenditure. Peak credit theory is not applicable in the case of assessee.

8.3 It may be noted in this case appeal of the assessee is being simultaneously disposed for AY 2004-05 to AY 2009-10. While verifying the record for different years, there is evidence of substantial investment in Mutual funds and shares. The investment in shares is evident from small amounts deposited I bank on ECS, with the name of companies. Also the narration of certain withdrawals are in the name of 3 ITA No.1404/K/2014 Dr. Murari Mohan Koley AY 2008-09

brokerages. Notices were issued to assessee to give the details investment in shares and Mutual funds. However, the assessee has steadfastly refused to do so. Prior to ECS era, there are several small deposits through outstation cheque which can be refunds. As there is no evidence from narration of withdrawal from bank for purchase of shares, the only inference is that certain cash withdrawals can be for purchase of shares through brokers; which the assessee has refused to clarify, but the evidence of which is ECS deposits in the bank account.

8.4 Further, from examination of deposit and withdrawal slip it is seen that all the deposit whether in cash or cheque is by assessee himself, clearly showing that the bank account though in joint name, reflected appellant's transaction. 8.6 In view of the above as the withdrawal was primarily for investment purpose and balance was clearly for personal expenditure, peak credit theory is not applicable in the case of the assessee. In view of the above it is held that AO had correctly added the deposits u/s. 69 of the I.T. Act.

8.6 In view of the above as the withdrawal was primarily for investment purpose and balance was clearly for personal expenditure, peak credit theory is not applicable in the case of the assessee. In view of the above it is held that AO had correctly added the deposits u/s. 69 of the I.T. Act."

Ld. counsel for the assessee stated that CIT(A) has not considered the alternate claim in respect of peak credit of the assessee as is evident from the findings of First Appellate Authority reproduced above. Ld. counsel for the assessee stated that he is ready to explain each and every entry for computing the peak credit before the CIT(A) if the issue is remitted back. Ld. counsel for the assessee stated that even AYs 2004-05 to 2009-10 except this relevant year i.e., AY 2008-09 all are already set aside to the file of CIT(A) after condonation of delay. Ld. counsel for the assessee stated that for the sake of consistency also, the issue needs reconsideration at the level of CIT(A) only qua the claim of peak credit. On the other hand, Ld. Senior DR contested the claim of peak credit of the assessee.

4. We have heard rival contentions and gone through the facts and circumstances of the case. We find that the alternate plea of the assessee that the assessment be made on the basis of peak credit but assessee has to prepare a peak credit with evidences and CIT(A) will adjudicate this issue, in case he feels that it requires investigation he can ask for remand report from the AO. As a matter of consistency and actually the other years are already set aside to the file of CIT(A), 4 ITA No.1404/K/2014 Dr. Murari Mohan Koley AY 2008-09

this matter is also being restored back to the file of CIT(A) for assessing the income of the assessee on the basis of peak credit, i.e., the deposits in Axis Bank. In terms of the above, we set aside the issue to the file of CIT(A) for fresh adjudication and this appeal of assessee is allowed for statistical purposes.

5. In the result, appeal of assessee is allowed for statistical purposes.

6. Order is pronounced in the open court on 13.05.2015.

Sd/- Sd/- (B. P. Jain) (Mahavir Singh) Accountant Member Judicial Member

Dated: 13th May, 2015

*Dkp/P.S

Copy of the order forwarded to:

1. APPELLANT -Dr. Murari Mohan Koley, 114/4/1A, Tollygunge Road, Kolkata-700 033 2 Respondent -ITO Ward-55(3), 54, Rafi Ahmed Kidwai Road, Kolkata-

700 016

3. The CIT(A), Kolkata

4. CIT Kolkata

5. DR, Kolkata Benches, Kolkata /True Copy, By order,

Asstt. Registrar.