Surendra Pal Singh Sahni Vs ACIT (ITAT Jaipur)
Money Changes Pockets, Not Income: ITAT Corrects Inflated Peak Credit
Inter-bank Transfers Cannot Artificially Inflate Peak Credit
The Jaipur Bench of the Income Tax Appellate Tribunal, following a Third Member decision, reduced a disputed peak-credit addition from ₹29,18,784 to ₹11,97,484. The central issue concerned transfers between the assessee’s own undisclosed bank accounts and their treatment while preparing a consolidated peak-credit calculation.
The majority accepted that the relevant transfers were contra entries representing movement of the same money between accounts. They could not inflate the consolidated peak merely because one side of the transfer was considered without properly accounting for the corresponding entry. The Tribunal also deleted a separate rental-income addition of ₹50,400, since that issue had already attained finality in the earlier round.
Four Undisclosed Accounts and a Second Round of Litigation
The assessee had maintained four undisclosed bank accounts, which were disclosed during the earlier proceedings. In the first round of litigation, the Tribunal directed the Assessing Officer to calculate the peak by merging all four accounts, rather than proceeding on the basis of their closing balances.
The purpose of that exercise was to determine the maximum amount represented by the transactions after considering the movement of funds. The earlier order also required the assessee to cooperate and furnish the relevant evidence.
While giving effect to those directions, the Assessing Officer prepared a consolidated working and arrived at a peak of ₹29,18,784 on 5 February 2005. This amount was added to the assessee’s income. The CIT(A) upheld the addition, resulting in the present appeals.
The Assessee’s Objection: The Same Money Was Being Counted Again
The assessee disputed the treatment of two entries of ₹10,28,000 and ₹5,49,500. According to him, these were transfers between the undisclosed accounts already included in the consolidated working, rather than fresh deposits introducing additional funds.
The complaint was that the Assessing Officer had considered only one side of the transfer entries, thereby overstating the available balance. The assessee sought substitution of the addition with ₹11,97,484, claiming relief of ₹17,21,300.
Before the Third Member, the assessee clarified that the substance of his objection was the incorrect treatment of inter-account transfers. His argument was that properly accounting for both sides of those transfers would remove the artificial inflation in the peak calculation.
Members Differed on the Relevant Peak
The Accountant Member accepted the assessee’s contention and held that the whole day’s credits and debits should be considered. He directed adoption of the end-of-day figure of ₹11,97,484, instead of the higher figure calculated during the day.
The Judicial Member disagreed. He observed that no provision had been shown requiring peak credit invariably to be taken at the end of the day. He consequently declined to substitute the Assessing Officer’s figure with the assessee’s proposed amount.
Because of this difference, the matter was referred under Section 255(4) to a Third Member. The reference concerned whether the calculation should adopt the end-of-day balance or the peak amount arising during the day, having regard to the earlier direction to merge the accounts.
Third Member: A Transfer Between Accounts Is a Transfer Between Pockets
The Third Member, Vice President Rajpal Yadav, examined the consolidated working and the nature of the disputed entries. He noted that ₹13,41,284 appeared as the closing balance of the merged accounts on 3 February 2005.
The two disputed entries on 5 February 2005 represented transfers from other undisclosed accounts of the assessee. They were therefore merely contra entries.
The Third Member explained that the transactions amounted, in effect, to shifting money from one pocket to another. Their net effect could not increase the funds represented by the merged accounts. On these facts, he agreed with the Accountant Member that ₹11,97,484 should be adopted for the computation.
Following the majority view, the final Bench allowed the relevant grounds and directed reduction of the disputed peak-credit addition.
A Settled Rental Addition Could Not Be Revived
The Assessing Officer had also added ₹50,400, representing ₹72,000 of alleged additional rent after allowing the 30% deduction.
Both original Members agreed that the rental issue had already been settled in the first round. It could not be reopened in the proceedings giving effect to the Tribunal’s directions. The final order accordingly deleted this addition.
The separate appeal arising from the rejection of the assessee’s Section 154 application became academic after relief was granted in the quantum appeal. The Third Member did not treat the substantive computation dispute as an apparent error warranting rectification.
Author’s Comments
The practical strength of this decision lies in its insistence on a correct consolidated calculation. Once accounts are merged, a transfer within that group cannot be treated as an independent introduction of money by recording its credit side and overlooking its debit side.
However, the ruling should not be presented as an unconditional rule that every peak must be calculated only at day-end. The decisive circumstances were the identified contra entries and the distortion they caused.
For practitioners, a transaction-wise reconciliation identifying fresh deposits, withdrawals and matched inter-bank transfers will be more persuasive than merely asserting that the peak is excessive. The decision also reinforces that a limited remand does not authorise revival of an issue already settled.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These present two appeals were originally heard by the Division Bench consisting of Hon’ble Accountant Member, Sh. Rathod Kamlesh Jayantbhai and Hon’ble Judicial Member, Sh. Narinder Kumar. On account of a difference of opinion between the Hon’ble Members on certain issues arising in these appeals the following point(s) of difference were framed and referred to the Hon’ble President of the Tribunal under Section 255(4) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
“The point of difference is specified as under: –
“As to whether, while applying peak credit theory, A.O is required to consider the peak credit “at the end of the day” OR to consider “the peak amount” having regard to the principles of said theory, and specific observations in the first round by the Co-ordinate ITAT Jaipur Bench that as per accounting principles in case of undisclosed bank account in which cash had been deposited, the AO was required to calculate the peak by merging of all the undisclosed bank accounts”
Sd/-
(Narinder Kumar)
Judicial Member
Question of law framed pertaining to ITA No.s.444 & 450/JP/2024 for the assessment year 2005-06 in re: Shri Surender Pal Singh Sahni Vs. ACIT, Central Circle, Kota.
Considering the facts and circumstances of the case, the AO while estimating the income as per direction of ITAT in first round should consider the peak during the day without considering the particular day’s credit/debit or he should have taken particular day’s peak credit ignoring the debit transaction of a day to determine peak credit.
Sd/-
(Rathod Kamlesh Jayantbhai)
Accountant Member”
2. The Hon’ble President, in exercise of powers u/s 255(4) of the Act, nominated a Third Member to resolve the point(s) of difference. The Hon’ble Third Member has since rendered his opinion vide order dated 13.03.2026.
Order of Hon’ble Accountant Member
Per Shri Rathod Kamlesh Jayantbhai
The above-named assessee challenges two separate orders of learned Commissioner of Income Tax, Udaipur-2 [ for short CIT(A) ] both dated 27/02/2024 and relates to assessment year 2005-06. That orders of the ld. CIT(A) arise because the assessee filed two separate appeals before him one on 13.11.2017 challenging the order dated 01.11.2017 passed u/s. 147/148/143(3) r.w.s. 254 of the Income Tax Act, 1961 [ for short Act ] passed by the DCIT, Central Circle, Kota [ for short AO ] and another on 17.01.2018 against the order passed u/s. 154 r.w.s. 147/148/143(3) r.w.s. 254 of the by the ld. AO.
2. In ITA No. 444/JP/2024, the assessee has raised following grounds: –
1. That under the facts and circumstances of the case and in law the Hon’ble CIT (A) Udaipur erred in holding that based on four bank accounts and ignoring other incomes the addition made by the Ld. AO at Rs. 2918784/- is justified as against Rs 1197484/- which is verifiable from working of AO also. Addition of Rs. 2918784/- therefore needs substitution to Rs 1197484/- i.e, relief of Rs. 1721300/-. We therefore pray for relief of Rs. 1721300/-
2. That under the facts and circumstances of the case, the Hon’ble CIT(A) erred in confirming addition of Rs. 1197484/- made by Ld. AO ignoring that the appellant assessee had shown undisclosed income of Rs. 871000/- also rental income of Rs.620000/- total Rs. 1491000/- which were to be set off with Rs. 1197484/-. We therefore pray for relief of Rs. 1197484/-
3. That under the facts and circumstances of the case, the Hon’ble CIT(A) erred in confirming addition of Rs. 50400/- ignoring that this issue was closed and it was not remitted back by Hon’ble ITAT. We therefore pray for deletion of addition of Rs. 50400/-.
4. That the appellant craves leave to add, alter, amend, modify and/or otherwise substitute any of the foregoing grounds as and when required.
2.1 In ITA No. 450/JP/2024 the assessee has raised following grounds: –
1. That under the facts and circumstances of the case and in law the Hon’ble CIT(A) Udaipur erred in holding that on basis of peak credit theory of four bank accounts the correct amount work out should be Rs. 2918784/- only and not Rs. 1197484/-. We pray for its substitution to Rs. 1197484/-.
2. That the appellant craves leave to add, alter, amend, modify and/or otherwise substitute any of the foregoing grounds as and when required.
3. First we deal with the appeal of the assessee in ITA no. 444/JP/2024. The brief facts of the case are that the assessee is in 2nd round of litigation before this appellate Tribunal. In the first round of litigation, the appeal of the assessee was allowed for statistical purposes by setting aside the issue by observing as under:
6. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee had submitted that additional income after claiming of standard deduction had been shown at Rs. 15,44,410/- whereas total income disclosed in the belated revised return at Rs. 16,73,352/-. The assessee considered the rental income from the Kirti Nagar, New Delhi flat, Bal Mandir House, Kota, interest from bank and on account of insufficient fund at Rs. 8,71,000/-. It is undisputed fact that four Benami accounts were undisclosed and disclosed first time on 18/4/2011. It is also a fact that the assesseehad depositedunaccounted cash. It is accounting principle that in case of undisclosed bank accounts, in which cash has been deposited, the ld Assessing Officer has to calculate the peak by merging all undisclosed bank accounts for the year under consideration to calculate the maximum income generated by the assessee during the year under consideration. The ld Assessing Officer had made addition on the basis of closing balance, the assessee also not submitted the details of credit and debit entries of all the bank accounts for the year under consideration, therefore, the assessee was also not came with clean hands after evading tax from F.Y. 1997-98 by acquiring Kirti Nagar, New Delhi flat. Thereafter Bal Mandir house, Kota in A.Y. 2001-02. The assessee disclosed shortage of cash as income at Rs. 8,71,000/- but it is not clear where this amount has gone, which is statutory obligation on the part of the assessee to disclose the true and full particulars of income and investment made during the year under consideration. The assessee has not disclosed the name and address of the tenant who had occupied the flat situated at Kirti Nagar, New Delhi. It is not acceptable that without any deed, he had allowed the property on rent. Even the assessee had not disclosed full particulars of income from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the ld AR of the assessee. Therefore, in absence of full details, the ld Assessing Officer has to decide the assessee’s case on estimated basis. Further the ld CIT(A) also had not passed reasoned order, so that we can conclude that he was justified in deleting the addition made by the ld Assessing Officer. Accordingly, we set aside the order of the ld CIT(A) to the Assessing Officer.
The assessee is directed to cooperate with the Assessing Officer and produce all the evidences of ownership of the properties acquired in F.Y. 1997-98, 2001-02 and also during the year under consideration, so that the Assessing Officer can assess the correct income on the basis of peak theory of the bank account as discussed above. Accordingly, the revenue’s appeal is set aside to the Assessing Officer and the appeal is allowed for statistical purposes only. We do not find any merit when CIT(A) has deleted the addition on account of rental account, therefore, C.O. of the assessee is dismissed.”
4. Thereafter, the ld. AO based on the submission of the assessee and after considering the direction of the ITAT, Jaipur Bench, Jaipur computed the taxable income of the assessee by merging all the debit and credit entries of four undisclosed account and thereby and the addition of Rs. 29,18,784/- was made in the income of the assessee. Ld. AO also made an addition of Rs. 50,400/- being 70% of the rent amount as income of the assessee and thereby the assessment of the assessee was completed on 01.11.2017 in that set aside proceedings.
5. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
Finding of ld. CIT(A) on peak working
“6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under—The reply of the appellant is considered. Hon’ble ITAT in the order directed to assess the correct income on the basis of peak theory of the bank accounts. There is no direction to consider the cash book and other income. The peak theory was to be applied only on with respect to bank accounts and no reference was made with regard to cash book. Therefore, the AO has followed the directions of Hon’ble ITAT and accordingly the argument of the appellant are not found to be acceptable. With regard to rental income, it is observed by Hon’ble ITAT that the assessee has not disclosed the name and address of the tenant who has occupied the flat. Even the assessee has not disclosed full particulars of income from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the AR of the assessee. Therefore, in absence of full details the AO has to decide the assessee’s case on estimate basis. Considering these observations, the claim of the assessee for considering the cash book was not found to be justified. The action of the AO is found to be correct. The issues raised by the appellant are found to be outside the scope of the directions of Hon’ble ITAT. The AO could not have decided the issue which is outside the scope of directions in the proceedings u/s 254 of the Income Tax Act. In view of the above discussion, there is no merit found in the issue raised by the appellant.
This ground of appeal is treated as dismissed.
Finding of ld. CIT(A) on the addition of rent income
8.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
It is argued that the Hon’ble ITAT has not remitted the issue relating to addition of Rs. 72000/- on account of undisclosed rent. Rather because of this reason only CO Application of appellant asssessee is dismissed Therefore there is no reason for the learned AO to revisit addition of Rs. 50400/- (72000 (-) 30% standard deduction) We therefore request your honour to delete addition of Rs. 50-400/-
The argument of the appellant are considered. Hon’ble ITAT observed in the order with regard to issue of rent as under-
“The assessee has not disclosed the name and address of the tenant who had occupied the flat situated at Kirti Nagar, New Delhi. It is not acceptable that without any deed, he had allowed the property on rent. Even the assessee had not disclosed full particulars of income from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the Id AR of the assessee. Therefore, in absence of full details, the Id Assessing Officer has to decide the assessee’s case on estimated basis. Further the Id CIT(A) also had not passed reasoned order, so that we can conclude that he was justified in deleting the addition made by the Id Assessing Officer.”
These observations appears to have been made with regard to ground no. 2 raised by the department before the Hon’ble ITAT which is reproduced as under-
(ii) On the facts and in circumstances of the case, the Id CIT(A) has erred in deleting the addition of Rs. 72,000/- on account of undisclosed rental income.”
In view of the above discussion, the addition made by the AO is found to be as per directions of Hon’ble ITAT. The appellant has not furnished any evidence to prove that the figure taken by the AO is incorrect. Hence, the addition made by the AO is found to be in order and upheld.
This ground of appeal is treated as dismissed.”
6. As the appeal of the assessee was dismissed by the ld. CIT(A), feeling dissatisfied with that finding the assessee is in appeal before this Tribunal on 2nd round of litigation. The bench noted that in this appeal, there are two issues which were raised by the assessee and on that he relied upon the order of the co-ordinate bench and filed the following written submission:
1) This is second round of appeal in first round the Hon’ble ITAT had remitted matter back with following directions:
“We have heard the rival contentions of both the parties and perused the material available on the record. The assessee had submitted that additional income after claiming of standard deduction had been shown at Rs. 15,44,410/- whereas total income disclosed in the belated revised return at Rs. 16,73,352/-. The assessee considered the rental income from the Kirti Nagar, New Delhi flat, Bal Mandir House, Kota, interest from bank and on account of insufficient fund at Rs. 8,71,000/-. It is undisputed fact that four Benami accounts were undisclosed and disclosed first time on 18/4/2011. It is also a fact that the assessee had depositedunaccounted cash. It is accounting principle that in case of undisclosed bank accounts, in which cash has been deposited, the Id Assessing Officer has to calculate the peak by merging all undisclosed bank accounts for the year under consideration to calculate the maximum income generated by the assessee during the year under consideration.
The ld. Assessing Officer had made addition on the basis of closing balance, the assessee also not submitted the, details of credit and debit entries of all the bank accounts for the year under consideration, therefore, the assessee was also not came with clean hands after evading tax from F.Y. 1997-98 by acquiring Kirti Nagar, New Delhi flat. Thereafter Bal Mandir house, Kota in A.Y. 2001-02. The assessee disclosed shortage of cash as income at Rs. 8,71,000/- but it is not clear where this amount has gone, which is statutory obligation on the part of the assessee to disclose the true and full particulars of income and investment made during the year under consideration. The assessee has not disclosed the name and address of the tenant who had occupied the flat situated at Kirti Nagar, New Delhi. It is not acceptable that without any deed, he had allowed the property on rent. Even the assessee had not disclosed full particulars of incoine from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the Id AR of the assessee. Therefore, in absence of full details, the Id Assessing Officer has to decide the assessee’s case on estimated basis. Further the Id CIT(A) also had not passed reasoned order, so that we can conclude that he was justified in deleting the addition made by the Id Assessing Officer. Accordingly, we set aside the order of the Id CIT(A) to the Assessing Officer. The assessee is directed to cooperate with the Assessing Officer and produce all the evidences of ownership of the properties acquired in F.Y. 1997-98, 2001-02 and also during the year under consideration, so that the Assessing Officer-can assess the correct income on the basis of peak theory of the bank account as discussed above. Accordingly, the revenue’s appeal is set aside to the
Assessing Officer and the appeal is allowed for statistical purposes only. We do not find any merit when CIT(A) has deleted the addition on account of rental account, therefore, C.O. of the assessee is dismissed.
(Page 10, 11 and 12 of ITAT Order)
2) Based on directions of Hon’ble ITAT the learned AO worked out peak credit of all 4 Bank Accounts. His working is spread in page 27 to 39 of Assessment Order. While working out the peak credit he forget that peak credit is taken on end of day and that while working out peak credit contra entries/transfer entries/journal/entries are ignored. In order to workout maximum peak he considered only one side of transfer entry and did not consider other part of transfer entry.
He worked out maximum peak credit holding as under: –
“On perusal of above consolidated working sheet of bank statements, it is only withdrawals which could be said to be source for the subsequent deposits. Therefore, the theory of peak bank deposit is applicable for deposits and withdrawals. So, the cash or cheque deposits and cash or cheque withdrawals need chronologically arranged as above to ascertain daily balances and the peak deposit during the year. Hon’ble ITAT Bench Jaipur has directed to assessing officer to calculate peak credit theory by merging all undisclosed bank accounts.
Therefore, above working is done by me by ignoring opening balance in four bank accounts and peak balance is identified on 05.02.2005 at deposition of Rs. 29,18,784/-.
The benefit of telescopy theory cannot be given by this office because Hon’ble ITAT has not given such directions in appellate order. Further, assessee had not disclosed four undisclosed accounts before assessment proceedings. So, request of telescopy benefit is rejected. Hence, following the directions of the Hon’ble ITAT an addition of Rs. 29,18,784/- is made in taxable income of the assessee by merging all the debit and credit entries of four undisclosed bank accounts.”
(Extract from Page 39 and 40 of Assessment Order)
3) With this we take GOA 1 which reads as under: –
“That under the facts and circumstances of the case and in law the Hon’ble CIT (A) Udaipur erred in holding that on basis of peak credit theory of four bank accounts the correct amount work out should be Rs. 2918784/-only and not Rs. 1197484/-. We pray for its substitution to Rs 1197484.”
4) (i) As submitted above the learned AO worked out Maximum Peak Credit on 05.02.2005 (Page 37 of Assessment Order which is reproduced as under): –
| Date | Particulars | Bank A/c No. | Deposit | Withdrawal | Balance | Narration |
|---|---|---|---|---|---|---|
| 05/02/2005 | RFRRJV | 01190023337 | 1028000 | 2369284 | Transfer | |
| 05/02/2005 | RFRRJV | 01190023337 | 549500 | 2918784 | Transfer | |
| 05/02/2005 | 01190023337 | 182500 | 2736284 | To Cash-W/S | ||
| 05/02/2005 | 01190023337 | 19300 | 2716984 | To Cash-W/S | ||
| 05/02/2005 | 01190023337 | 58000 | 2774984 | Special Local Clearing 483906/Union Bank of India | ||
| 05/02/2005 | RFRRJV | 01190023339 | 549500 | 2225484 | TR | |
| 05/02/2005 | RSRRJV | 01190023658 | 1028000 | 1197484 | Transfer |
(ii) Had learned AO given effect to both sides of journal entries he could have jurisdictionally worked out it as under: –
| Date | Particulars | Bank A/c No. | Deposit | Withdrawal | Balance | Narration |
|---|---|---|---|---|---|---|
| 03/02/2005 | 01190023339 | 1341284 | Special Local Clearing 483905/Union Bank of India | |||
| 05/02/2005 | RFRRJV | 01190023337 | 1028000 | 1341284 | Transfer | |
| 05/02/2005 | RSRRJV | 01190023658 | 1028000 | Transfer | ||
| 05/02/2005 | RFRRJV | 01190023337 | 549500 | 1341284 | Transfer | |
| 05/02/2005 | RFRRJV | 01190023339 | 549500 | TR | ||
| 05/02/2005 | 01190023337 | 182500 | 1158784 | To Cash-W/S | ||
| 05/02/2005 | 01190023337 | 19300 | 1139484 | To Cash-W/S | ||
| 05/02/2005 | 01190023337 | 58000 | 1197484 | Special Local Clearing 483906/Union Bank of India |
Thereby with these two transfer entries the balance could have been Rs.1341284/- and on end of the day Rs.1197484/-.
(i) Even application u/s 154 is rejected.
The Hon’ble CIT(A) confirmed it holding as under: –
“I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
In this case, the AO noted that he has followed the directions of the Hon’ble ITAT and undisclosed income of Rs. 29,18,784/- is worked by applying peak credit theory and merging all the bank accounts. First of all he has considered maximum credit to tax undisclosed income and thus undisclosed income of Rs. 29,18,784/- is identified on particular date 05.02.2005. The substitution of undisclosed income of Rs.11,97,484/- cannot be accepted. It is clearly mentioned at page number 39 of assessment order that the amount of peak credit to be added as income u/s. 68 of the Act. The application moved by the assessee u/s 154 is liable to be dismissed as the issue involved is outside the purview of section 154 of the I.T. Act 1961. Section 154 allows only rectification of mistake apparent from record.
The issue has been discussed in the order passed on the appeal filed against the order passed u/s 254 by the AO. There is no mistake apparent from record which could have been rectified. Therefore, the AO is found to be justified in rejecting the application filed u/s 154 of the Income Tax act.
This ground of appeal is treated as dismissed.”
(Para 4.3 – Page 7 and 8 of Appeal Order)
We request your honour for relief of debit side/contra side of journal/transfer entry Rs.1577500/- (1028000+549500)
5) That GOA 2 reads as under: – “That the appellant craves leave to add, alter, amend, modify and/or otherwise substitute any of the foregoing grounds as and when required.” We do not press GOA2.
ITA No. 450/JPR/2024 Re. Order u/s 143(3)
6) (i) That GOA1 reads as under: – “That under the facts and circumstances of the case and in law the Hon’ble CIT (A) Udaipur erred in holding that based on four bank accounts and ignoring other incomes the addition made by the Ld. AO at Rs. 2918784/- is justified as against Rs 1197484/- which is verifiable from working of Ld. AO also. Addition of Rs. 2918784/- therefore needs substitution to Rs 1197484/- i.e., relief of Rs. 1721300/-. We therefore pray for relief of Rs. 1721300/-”
(ii) After giving effect to debit part of journal entry, as prayed in ITA No.444above, there shall be relief of Rs.1577500/- (1028000+ 549500)) with the negative balance at Rs.1341284/-. However, in order to tax income it is expected to be worked out on close of the day. After giving effect to 3 other bank entries of the same day (05.02.2005) which are worked out by learned AO at page 37 of assessment order balance being Rs.1197484/- we request for relief of Rs.1721300/- (2918784 – 1197484) as againstRs.1577500/-. We therefore request your honour to please allow us relief ofRs.1721300/-.
7) (i) That GOA 2 reads as under: – “That under the facts and circumstances of the case, the Hon’ble CIT(A) erred in confirming addition of Rs. 1197484/- made by Ld. AO ignoring that the appellant assessee had shown undisclosed income of Rs. 871000/- also rental income of Rs.620000/- total Rs. 1491000/- which were to be set off with Rs. 1197484/-. We therefore pray for relief of Rs. 1197484/-.”
(ii) That there is no denial to this fact that the appellant/assessee had suo motto shown following income: –
(i) Income from undisclosed sources Rs.871000/- (shown on 02.04.2014 PB 6)
(ii) Rent from Bal Mandir School Road, Kota house. Rs.612000/- (51000 X 12)
(iii) Rent from L-113, Kirti Nagar New Delhi flat. Rs.132000/- (11000 X 12)
(iv) Bank Interest Rs.164612/- Total Rs.1779612/-
This is appearing at page 3 and page 9 of order of Hon’ble ITAT (ITA 673/JP/2014 dated 21.06.2016) also.
(iii) During reassessment proceedings we requested learned AO for it’s set off with money deposited in bank while working out peak credit but he held that Hon’ble ITAT has not directed us to give such effect.
(iv) The Hon’ble CIT(A) decided it holding as under: –
“The reply of the appellant is considered. Hon’ble ITAT in the order directed to assess the correct income on the basis of peak theory of the bank accounts. There is no direction to consider the cash book and other income. The peak theory was to be applied only on with respect to bank accounts and no reference was made with regard to cash book. Therefore, the AO has followed the directions of Hon’ble ITAT and accordingly the argument of the appellant are not found to be acceptable. With regard to rental income, it is observed by Hon’ble ITAT that the assessee has not disclosed the name and address of the tenant who has occupied the flat. Even the assessee has not disclosed full particulars of income from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the AR of the assessee. Therefore, in absence of full details the AO has to decide the assessee’s case on estimate basis. Considering these observations, the claim of the assessee for considering the cash book was not found to be justified. The action of the AO is found to be correct. The issues raised by the appellant are found to be outside the scope of the directions of Hon’ble ITAT. The AO could not have decided the issue which is outside the scope of directions in the proceedings u/s 254 of the Income Tax Act. In view of the above discussion, there is no merit found in the issue raised by the appellant.” (Page 33 of Appeal Order)
(v) Sir, it is cardial principle of law that no one should be harassed twice for the same cause. It is contrary to canon of law to tax same amount twice
(vi) From 01.04.2004 to 05.02.2005 we have following income which is appearing in our cash book and ledger book also (PB 6 to 55).
(i) Income from undisclosed sources Rs.871000/- (shown on 02.04.2014) (PB6)
(ii) Rent from Kota house @ Rs.51000/- PM shown on Rs.510000/- last day of every month (51000 X 10)
(iii) Rent from New Delhi flat.@ Rs.11000/- PM shown on Rs.110000/- last day of every month (11000 X 10)
(iv) Interest from Bank (Rs.84031/- in July 2004 and Rs.164640/- Rs.81318/- in January 2005, less Bank Charges Rs709 (Net). Rs.164640/- (84031 + 81318 = 165349 – 709)
Total Rs.1655640/-
If from Rs.1655640/- negative balance as on 05.02.2005, worked out by the learned AO at Rs.1197484/-, is reduced Cash in hand on 05.02.2005 shall come to Rs.458155/- which tallies to Cash Balance shown in Cash Book (PB 34).
(i) We therefore request your honour to delete addition of Rs.1197484/-.
8) That GOA 3 reads as under: – “That under the facts and circumstances of the case, the Hon’ble CIT(A) erred in confirming addition of Rs. 50400/- ignoring that this issue was closed and it was not remitted back by Hon’ble ITAT. We therefore pray for deletion of addition of Rs. 50400/-”
We request your honour that in first round of proceedings addition of Rs.72000/- being additional rent @ Rs.6000/- per month from New Delhi Flat was made by ld. AO. However during first appeal we had submitted before Hon’ble CIT(A) that though we had regular rental income of Rs.62000/- (51000 + 11000/-) per month we took opening cash in hand at NIL. We also did not made this claim that rent of March 2004 was received by us in April 2004. Undisclosed income of Rs.871000/- is also shown by us on 2nd April and not on 1st April. Had we extra rent income of Rs.6000/- per month we could have shown undisclosed income less by Rs.72000/- and thereby could have saved tax on Rs.21600/- (30% standard deduction on rent Rs.72000/-). Considering our submissions Hon’ble CIT(A) had granted us relief. Department had taken it in second appeal and assessee had also taken it in CO for reduction of income by Rs.21600/-. Though this issue was not decided by Hon’ble ITAT in specific terms but following two lines of page 12 of order of Hon’ble ITAT speaks indirectly that this issue was closed.
“We do not find any merit when CIT(A) has deleted the addition on account of rental account, therefore, C.O. of the assessee is dismissed.”
Wetherefore, request your honour that as this issue was closed in first round again this addition is uncalled for. In alternate we submit that had we more rent we could have saved our tax on Rs.21600/.
We therefore pray for deletion of addition of Rs.50400/-.
9) That GOA4 reads as under: –
“That the appellant craves leave to add, alter, amend, modify and/or otherwise substitute any of the foregoing grounds as and when required.”
We do not press it.
Submitted
7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:
| S. No. | Particulars of papers/ documents filed | Page Numbers |
|---|---|---|
| 1. | Copy of Application u/s 154 dated 11.11.2017 | 1-2 |
| 2. | Copy of Written Submission dated 24.08.2023 filed before Hon’ble CIT(A)-2 Udaipur in appeal against order u/s 154. | 3 to 5 |
| 3. | Copy of Cash Book & Ledger Book | 6 to 55 |
| 4. | Copy of Written Submission dated 24.08.2023 filed before Hon’ble CIT(A)-2 Udaipur in appeal against order u/s 143(3)/254. | 56 to 59 |
| 5. | Copy of remand reported 19.01.2024 filed by ld ACIT (Central Circle), Kota to Hon’ble CIT(A)-2, Udaipur. | 60 to 81 |
| 6. | Copy of letter dated 08.02.2024 filed before Hon’ble CIT(A)-2, Udaipur in reply to remand report dated 19.01.2024 | 83 to 86 |
| 7. | Acknowledgement of Appeal No. 1712587635 | 87 |
| 8. | Acknowledgement of Appeal No. 1712657697 | 88 |
7.1 Case laws relied upon:
| S. No. Particulars Page No. | ||
|---|---|---|
| 1 [2007] 294 ITR 610 (Allahabad) High Court of Allahabad Commissioner of | Income-Tax v. Vijay Agricultural Industries | 1-3 |
| 2 [2019] 103 Taxmann.com 142 (Article) Concept of telescoping and peak credit in | Income tax Assessments. | 4-8 |
8. On the other hand ld. DR relied upon the orders of the lower authority.
9. We have heard the rival contentions and perused the material placed on record. The bench noted that so far as the first issue is concerned, the Co-ordinate Bench has directed the Assessing Officer to consider the peak by merging all the debit and credit entries of four undisclosed account which was computed and the relevant part of the computation is extracted herein below, so as to have clarity on the dispute:
| Date | Particulars | Bank A/c No. | Deposit | Withdrawal | Balance | Narration |
| 03.02.2005 | 0 | 90395 | — | — | 13,41,284 | Special Local Clearing 483905/Union Bank of India |
| 05.02.2005 | RFRRJV | 01190023337 | 10,28,000 | — | 23,69,284 | Transfer |
| 05.02.2005 | RFRRJV | 01190023337 | 5,49,500 | — | 29,18,784 | Transfer |
| 05.02.2005 | — | 01190023337 | — | 1,82,500 | 27,36,284 | To Cash-W/S |
| 05.02.2005 | — | 01190023337 | — | 19,300 | 27,16,984 | To Cash-W/S |
| 05.02.2005 | 0 | 01190023337 | 58,000 | — | 27,74,984 | Special Local Clearing 483906/Union Bank of India |
| 05.02.2005 | RFRRJV | 01190023339 | — | 5,49,500 | 22,25,484 | TR |
| 05.02.2005 | RSRRJV | 01190023658 | — | 10,28,000 | 11,97,484 | Transfer |
| 07.02.2005 | — | 01190023337 | — | 13,000 | 11,84,484 | To Cash-W/S |
| 08.02.2005 | 680778 | 01190023337 | — | 3,00,000 | 8,84,484 | Transfer Chq 00680778 |
| 08.02.2005 | 680779 | 01190023337 | — | 3,00,000 | 5,84,484 | Transfer Chq 00680779 |
10. As is evident from the above extract of computation of peak credit, ld. AO must consider the peak credit as on the end of the day i.e. 05.02.2005 considering the whole days credit and debit and not the mid of the day peak which was worked out at Rs. 29,18,784/- and added. But in fact, the peak should be worked out at the end of the working day and not on mid. Considering that aspect of the matter and since there is no dispute as to the computation of peak, we direct the ld. AO to consider the peak on the end of the day which amounts to Rs. 11,97,484/- considering that aspect of the matter. Ground Nos. 1 & 2 raised by the assessee are allowed.
11. The bench noted that as regards Ground No. 3 which is in relation to an amount of Rs. 72,000/- considered as rent of flat of the assessee for which disallowance of Rs. 72,000/- allowing credit of 30% on repairs balance amount of Rs. 50,400/- was again added in the hands of the assessee in the second round. Before us the Ld. AR of the assessee contested that the issue which the Ld. AO has again raised in this set aside the proceeding was already settled. The bench vide para 2 noted that the CIT(A) has allowed the appeal by holding that addition made under the head rental income by holding that if the rental income is increase then undisclosed income decreased by Rs. 72,000/- being telescopic impact there by could have saved tax on Rs. 21,600/- being a standard deduction @ 30 %. Thereafter finally deciding that addition the co ordinate bench noted when the ld. CIT(A) has deleted that addition on account of rental account and the CO of the assessee was dismissed. Considering that aspect of the matter that matter of rental income has already been settled in the first round and therefore, action of the ld. AO taking the same is not correct in the second round. Considering that aspect of the matter, the bench is of the considered view that the addition of Rs. 50,400/- made was not disputed before ITAT and therefore, again making that addition innd the hands of the assessee. The 2 round of litigation is not in accordance with law and therefore, the same is directed to be deleted. Based on these observations, ground No. 3 is allowed.
12. Ground no. 4 raised by the assessee is technical ground and there is no specific grievance raised by the assessee therefore, the same is not required to be adjudicated.
13. The bench noted that as regards the appeal of the assessee in ITA No. 450/JP/2024 is against the rectification application moved by the assessee in computation of peak credit, the same was rejected vide an order dated 17.01.2018 which was again disputed by the assessee before ld. CIT(A) and in that order. The Ld. CIT(A) has not considered the submission of the assessee and thereby confirmed that addition. Since the bench has while dealing with appeal of the assessee in quantum proceedings in ITA No. 444/JP/2024 has allowed the appeal of the assessee. The appeal of the assessee filed consequent to the order u/s 154 of the Act becomes academic in nature and therefore, the same is allowed for statistical purposes. In the result the appeal of the assessee is allowed.
Order of Hon’ble Judicial Member Per Shri Narinder Kumar
The assessee is before this Appellate Tribunal, as he is feeling dissatisfied with the order dated 27-02-2024 passed by ld. CIT(A), u/s 250 of the Income Tax Act, 1961 (for short ‘’the Act’’), relating to assessment year 2005-06.
2. Vide impugned order, appeal filed by the assessee, challenging the assessment order dated 1-11-2017, passed u/s 147, 148 and 143(3) r.w.s. 254 of the Act, has been dismissed.
3. Vide assessment order dated 1-11-2017, the AO computed total income of the assessee as under:-
Computation of Total Income
| Particulars | Amount |
|---|---|
| Taxable income after the CIT(A)’s order dated 25-07-2014 and appeal effect order dated 7-08-2014 | Rs.16,73,354/- |
| Addition on account of rental income | Rs.50,400/- |
| Addition on account of unexplained deposits in undisclosed bank accounts | Rs.29,18,784/- |
| Assessed Income | Rs.46,42,538/- |
| Rounded off | Rs.46,42,540/- |
4. The second mentioned appeal No. 450/JP/2024 has been filed by the assessee challenging the order dated 27-02-2024 passed by the ld. CIT(A), u/s 250 of the Act. It also relates to assessment year 2005-06.
Vide impugned order the ld. CIT(A) dismissed the appeal filed by the assessee. That appeal was filed challenging order dated 17-10-2018 i.e. rectification order passed u/s 154 of the Act, by AO – DCIT, Central Circle, Kota. The AO had rejected an application filed by the assessee, before the Assessing Officer on 13-11-2017 with the prayer that amount of addition of Rs. 29,18,784/- be substituted with an addition of Rs.11,97,484/- only. The assessee had sought for rectification while referring to directions issued by ITAT, Jaipur Bench, in the first round of litigation relating to the same assessment year.
5. While dismissing the application filed by the assessee, the AO observed that he had followed the directions issued by ITAT Jaipur Bench, Jaipur and worked out the undisclosed income at Rs.29,18,784/- by applying peak credit theory and merging of the bank accounts. While dismissing the appeal filed by the assessee against the above said rectification order, the ld. CIT(A) also observed that the AO had followed the direction of ITAT, Jaipur Bench, Jaipur in working out undisclosed income by applying peak credit theory and merging of the bank accounts. He was also of the view that there was no mistake apparent from record which required rectification.
6. This common order is to dispose of both the above captioned appeals as the same pertain to the same assessment year and have been argued by the ld. AR for the appellant and Ld. DR for the Department, together.
7. Arguments heard. Files Perused.
8. It may be mentioned here that this is second round of litigation. Earlier the matter came up before this Tribunal by way of ITA No. 673/JP/2014, filed by the Department, challenging order dated 25-07-2014 passed by the ld. CIT(A), Kota, relating to assessment year under consideration i.e. 2005-06. At the same time, the assessee had come up before the ITAT, Jaipur Bench, Jaipur by way of C.O. No. 35/JP/2024 feeling aggrieved by the same order dated 25-07-2014 passed by the ld. CIT(A). At that time, in ITA No. 674/JP/2014, the Department had challenged the above said order dated 25-07-2014 on the following two grounds.
Ground of ITA No. 673/JP/2014 Revenue’s appeal
“On the facts and in the circumstances of the case, the ld CIT(A) has erred in:-
(i) deleting the addition of Rs. 50,29,106/- on account of unexplained cash at Bank and cash in hand U/s 68 of the Act;
(ii) deleting the addition of Rs. 72,000/- on account of undisclosed rental income.”
On the other hand, the assessee filed cross objection raising following grounds:
Ground of Assessee’s C.O. No. 35/JP/2014
“1. That the ld CIT(A) while allowing GOA 3 of the appellant erred in ignoring appellants’ submission that he has disclosed rental income what he actually received which has necessitated him more payment of tax on undisclosed income Rs. 8,71,000/- which could have been otherwise less by Rs. 21,600/- being 30% of Rs. 72,000/-.”
The above said ITA No. 673/JP/2014 and CO No. 35/JP/2014 came to be disposed off by the Coordinate Bench of ITAT, Jaipur.
The appeal filed by the Revenue was allowed for statistical purposes only, whereas C.O filed by the assessee was held to be not maintainable while observing that ld CIT (A) had deleted the addition on account of rental income.
9. While disposing of the appeal filed by the Department, the ITAT Coordinate Bench, Jaipur observed and issued direction to the AO in the manner as
“6………The assessee had submitted that additional income after claiming of standard deduction had been shown at Rs. 15,44,410/- whereas total income disclosed in the belated revised return at Rs. 16,73,352/-. The assessee considered the rental income from the Kirti Nagar, New Delhi flat, Bal Mandir House, Kota, interest from bank and on account of insufficient fund at Rs. 8,71,000/-.
It is undisputed fact that four Benami accounts were undisclosed and disclosed first time on 18/4/2011. It is also a fact that the assesseehad depositedunaccounted cash.
It is accounting principle that in case of undisclosed bank accounts, in which cash has been deposited, the ld Assessing Officer has to calculate the peak by merging all undisclosed bank accounts for the year under consideration to calculate the maximum income generated by the assessee during the year under consideration.
The ld Assessing Officer had made addition on the basis of closing balance, the assessee also not submitted the details of credit and debit entries of all the bank accounts for the year under consideration, therefore, the assessee was also not came with clean hands after evading tax from F.Y. 1997-98 by acquiring Kirti Nagar, New Delhi flat. Thereafter Bal Mandir house, Kota in A.Y. 2001-02. The assessee disclosed shortage of cash as income at Rs. 8,71,000/- but it is not clear where this amount has gone, which is statutory obligation on the part of the assessee to disclose the true and full particulars of income and investment made during the year under consideration.
The assessee has not disclosed the name and address of the tenant who had occupied the flat situated at Kirti Nagar, New Delhi. It is not acceptable that without any deed, he had allowed the property on rent. Even the assessee had not disclosed full particulars of income from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the ld AR of the assessee. Therefore, in absence of full details, the ld Assessing Officer has to decide the assessee’s case on estimated basis.
Further the ld CIT(A) also had not passed reasoned order, so that we can conclude that he was justified in deleting the addition made by the ld Assessing Officer.
Accordingly, we set aside the order of the ld CIT(A) to the Assessing Officer. The assessee is directed to cooperate with the Assessing Officer and produce all the evidences of ownership of the properties acquired in F.Y. 1997-98, 2001-02 and also during the year under consideration, so that the Assessing Officer can assess the correct income on the basis of peak theory of the bank account as discussed above……..’’
10. That is how, the AO, once again, was seized of the matter and the assessment proceedings led to passing of the impugned assessment dated 9-11- 2017 which in turn came to be challenged before the ld. CIT(A).
11. The assessee has challenged the order dated 27-02-2024 (which has led to ITA No. 444/JP/2024) on the following grounds of appeal.
1. That under the facts and circumstances of the case and in law the ld. CIT (A)Udaipur erred in holding that based on four bank accounts and ignoring other incomes the addition made by the Ld. AO at Rs. 2918784/- is justified as against Rs 1197484/- which is verifiable from working of AO also. Addition of Rs. 2918784/- therefore needs substitution to Rs 1197484/-i.e, relief of Rs. 1721300/-. We therefore pray for relief of Rs. 1721300/-
2. That under the facts and circumstances of the case, the ld. CIT(A) erred in confirming addition of Rs. 1197484/-made by AO ignoring that the appellant assessee had shown undisclosed income of Rs. 871000/- also rental income of Rs.620000/- total Rs. 1491000/-which were to be set off with Rs. 1197484/- We therefore pray for relief of Rs. 1197484/-
3. That under the facts and circumstances of the case, the ld. CIT(A) erred in confirming addition of Rs. 50400/-ignoring that this issue was closed and it was not remitted back by Hon’ble ITAT. We therefore pray for deletion of addition of Rs. 50400/-.
Gr.No.3 (ITA No.444/24)
12. First of all, we take up the above said ground no. 3 which challenges the addition of Rs.50,400/-. ld. AR for the appellant has submitted that the said addition confirmed by the ld.CIT(A) deserves to be set aside, the reason being that the said addition was earlier set aside by Learned CIT(A), in the first appeal in the first round of litigation. In support of his submission, the ld AR has relied upon the impugned assessment order wherein while dealing with the addition on account of undisclosed income from rental income (at page 17), reproduced the observations made by ld. CIT(A) i.e. in the first round:
“ and the conclusions arrived at without going into the merits of the case and giving the benefit of telescoping by presuming that any additional rent received was part of the ‘’income declared from undisclosed sources’’, and that no addition was called for.” Furthermore, at page 12 of the order dated 12-06-2016, the Coordinate Bench of ITAT, Jaipur clearly observed that there was no merit in the cross objection filed by the assessee, when the ld. CIT(A) had deleted the addition on account of rental income.
13. This goes to show that the ld. CIT(A) had allowed Ground No. 3 of the assessee in his favour.
14. In the course of arguments, the ld. DR for the Department has not disputed the above said factual position and the observations made by the ld.CIT(A) while dealing with the said addition on account of rental income.
15. As a result, we find merit in the contentions raised by the ld. AR for the appellant that AO had no jurisdiction to make addition of Rs.50,400/- on account of rental income, once the issue stood already settled. Being in agreement with the view expressed by my Learned Brother, this ground No.3 raised by the assessee deserved to be allowed in his favour. Ground No. 1 (ITA No. 444/JP/2024)-
16. This Ground challenges the confirmation of the other addition of Rs.29,18,784/- made by the AO on account of unexplained deposits in undisclosed bank accounts of the assessee.
As per the grounds of appeal presented by the assessee, addition needs to be substituted with amount of Rs.11,97,484/-, and that the impugned order passed by the ld.CIT(A) confirming the addition in toto deserves to be set aside to this extent. The ld. AR for the assessee has referred to the directions issued by the Coordinate Bench ITAT, Jaipur, while disposing of appeal in first round, vide order dated 23-06-2016 and submitted that the matter was remanded to the Assessing Officer to assess correct income of the assessee on the basis of peak credit theory of the bank accounts. Further, it has been pointed that in such like matters, while applying peak credit theory, the income required to be worked out should have been the income at the end of the day i.e. 5-02-2005, but, the AO did not correctly apply peak credit theory, and as a result, addition to the tune of Rs.29,18,784/- came to be made in place of addition of Rs.11,97,484/-. In this regard, ld. AR for the appellant has referred to page 27 to 39 of the assessment order wherein the AO has mentioned about entries of cash deposits on cash withdrawal, non-cash deposits and non-cash withdrawals. as transpire from the undisclosed bank account of the assessee. Then, particularly referring to the entries pertaining to 5-02-2005, available at page 37 of the assessment order, the ld AR for the appellant has pointed out on the said date the first entry was regarding deposits of Rs.10,28,000/- and then depicting balance of Rs.23,69,284/-. Learned AR has further submitted that last entry of the day was withdrawal of Rs.10,28,000/- leaving a balance of Rs.11,97,484/-. Ld. AR has pointed out that in the assessment order, the AO though observed that theory of peak bank deposits was applicable in respect of deposits and withdrawal, but at the same time went on to observe that herein source of cash and cheque deposits had not been properly explained by the assessee, and accordingly, he went on to make this addition of Rs.29,18,784/-, but the same needs to be substituted. In nut shell, contention on behalf of the assessee is that while working out peak credit, the Assessing Officer forgot that peak credit is taken “on the end of the day., and that while working out peak credit, credit contra entries/transfer entries/journal entries are ignored, and in this manner the Assessing Officer considered only one side of transfer entry and not the other part of the transfer entry. Learned AR has urged that with the two transfer entries, the balance at the end of the day i.e. 5.2.2005 would have been Rs.11,97,484/-, and as such the disputed amount addition be substituted with this amount.
17. ld. DR for the Department has submitted that he stands by observations made by the AO and upheld by the ld. CIT(A) due to the above said reasons that the assessee had not properly explained source of cash and check deposits. In support of his submission, ld. DR has relied upon decision in the case of CIT vs Vijay Agriculture Industries, [2007] 294 ITR 610 (Allahabad High Court).
18. In Vijay Agriculture Industries case (supra), the question before the Hon’ble High Court of Allahabad was as to whether ITAT was legally correct in holding that actual amount of peak credit should be added, as unexplained cash credit u/s 68 of the Act. That matter related to the A.Y. 1979-80. The assessee therein, a registered firm, was engaged in manufacture and sale of agricultural implements and iron scrap etc. The AO had noticed certain cash credits in squared up accounts. So he called upon the assessee to prove genuineness of the said deposits. There upon the assessee presented only confirmation letters, but failed to produce any other kind of evidence in support of cash credit. Therein, in respect of squared up the accounts of two depositors, the AO had resorted to the peak credit as regards unexplained deposits and added the sum u/s 68 of the Act. As regards the remaining deposits, there was no transaction between the assessee and depositors. In an earlier decision in case of title as Bhaiyalal Shyam Behari Vs CIT [2005] 276 ITR 38 decided on 19-01-2005, the Hon’ble High Court of Allahabad had held that principle of peak theory is not applicable in the case where the deposits remain unexplained u/s 68 of the Act. Ld. DR has also relied upon an Article published in ‘[2019] 103 taxmann.com 142 (Article), wherein the learned author was of the view that peak credit could be applied only in the case of squared up accounts but not in a case of where cash was deposited in the bank account and subsequently cheques were issued to different parties, particularly, when the assessee was unable to explain the source of cash deposited in the bank account.
19. As noticed above, and also admitted on behalf of the Department in the first round, ITAT Jaipur Bench observed that as per accounting principles in case of undisclosed bank account in which cash had been deposited, the AO was required to calculate the peak by merging of all the undisclosed bank accounts for the year under consideration to calculate the maximum income generated by the assessee during the year under consideration.
Accordingly, for the reasons recorded in para 6 of the order dated 23-06- 2016, the Coordinate Bench of ITAT, Jaipur observed that in absence of full details, the AO had to decide assessee’s case on estimate basis. Accordingly, the assessee was directed to cooperate with AO and produce all the evidences so that the AO could correct the income on the basis of peak theory of bank account as discussed therein.
20. I have gone through the copy of bank statement submitted by the assessee particularly, page no.80 of the paper book which reflects debit entry dated 5-02- 2005 to the tune of Rs. 10,28,000/- and the entries depicted at page 37 of the assessment order, reflecting balance of Rs.11,97,484/- on the given date i.e. 5-02- 2005 after debit and withdrawal entries of Rs.10,28,000/-and Rs.5,49,500/- by way of transfers.
21. I have carefully gone through the order prepared by Learned Brother. With all humility and respect, I am not in agreement with the view expressed by the Learned Brother that while working out peak credit, AO must consider the peak credit “at the end of the day”, or to issue such direction to the AO. The purpose of peak credit theory is to avoid double taxation of the same income. In order toavail of the benefit of peak, the assesseehas to admit that borrowings made by the assessee are from non genuine cash creditors, and the payments made or the amounts shown outgoing were only to himself in the form of withdrawals and the payees were also bogus. It is the highest closing balance against any entry in the accounting period, that arises after such adjustment of deposit/withdrawal, which becomes the peak in the accounting period.
In respect of applicability of peak theory, there is generally nothing on record which can help determine the real income which has accrued to the assessee in respect of his money lending business in terms of agreements, contracts etc. with the borrowers and lenders which can throw light on the rate of interest charged /paid by the assessee, duration of loans /advances, repayment, etc. In such circumstances, application of the peak credit theory is the most reasonable and appropriate basis for determining the real income in the hands of the assessee. In this regard, reference may be made to the observations made by our own Hon’ble High Court in Om Prakash Agarwal, Jaipur v. Acit, Jaipur on 24 November, 2016. Nowhere, it has been provided that peak credit is taken at the end of the day. Learned AR for the assessee has also not referred to any provision which so stipulates. In the given facts and circumstances, there is no merit in the contention on behalf of the assessee is that while working out peak credit, that peak credit is taken “on the end of the day, or that having regard to the two transfer entries, the balance at the end of the day i.e. 5.2.2005 would have been Rs.11,97,484/-, and as such the disputed amount addition be substituted with this amount.
22. As a result of the above discussion, ground No.1 raised on behalf of the assesseedeserves to be rejected. No other ground has been pressed during arguments or in written submissions pertaining to this appeal. Result As a result, this appeal ITA No.444/JP/2024 deserves to be partly allowed while allowing ground No.3 raised by the appellant, but rejecting ground No.1 raised by the appellant. But as already observed above, I am not in agreement with the view expressed by the Learned Brother The point of difference is specified as under: –
“As to whether, while applying peak credit theory, A.O is required to consider the peak credit “at the end of the day” OR to consider “the peak amount” having regard to the principles of said theory, and specific observations in the first round by the Co-ordinate ITAT Jaipur Bench that as per accounting principles in case of undisclosed bank account in which cash had been deposited, the AO was required to calculate the peak by merging of all the undisclosed bank accounts”
ITA No.450/JP/2024
23. The second mentioned appeal No. 450/JP/2024 has been filed by the assessee challenging the order dated 27-02-2024 passed by the ld. CIT(A), u/s 250 of the Act. It also relates to assessment year 2005-06.
Vide impugned order the ld. CIT(A) dismissed the appeal filed by the assessee.
That appeal was filed challenging order dated 17-10-2018 i.e. rectification order passed u/s 154 of the Act, by AO – DCIT, Central Circle, Kota. The AO had rejected an application filed by the assessee, before the Assessing Officer on 13-11-2017 with the prayer that amount of addition of Rs. 29,18,784/- be substituted with an addition of Rs.11,97,484/- only. The assessee had sought for rectification while referring to directions issued by ITAT, Jaipur Bench, in the first round of litigation relating to the same assessment year.
24. While dismissing the application filed by the assessee, the AO observed that he had followed the directions issued by ITAT Jaipur Bench, Jaipur and worked out the undisclosed income at Rs.29,18,784/- by applying peak credit theory and merging of the bank accounts.
25. While dismissing the appeal filed by the assessee against the above said rectification order, the ld. CIT(A) also observed that the AO had followed the direction of ITAT, Jaipur Bench, Jaipur in working out undisclosed income by applying peak credit theory and merging of the bank accounts. He was also of the view that there was no mistake apparent from record which required rectification.
26. As noticed above, vide rectification order dated 17-01-2018, the AO rejected application filed by the assessee whereby he had requested for substitution of addition of Rs.29,18,784/- with Rs.11,97,484/-.
27. For the reasons recorded above, in my view, ground no. 1 raised by the assessee in ITA No.444/JPR.//2024 deserves to be rejected, consequently, this appeal filed by the assessee challenging the impugned order passed by ld. CIT(A) upholding dismissal of application under section 154 of the Act does not call for adjudication of the same issue separately, once again, and deserves to be dismissed, but there is difference of opinion on the point, as specified above, and as such law shall take its own course. As per Instruction No.78, contained in the Official Manual, matter is required to be referred to the Hon’ble President under section 255(4) of the Act. As a result, files alongwith copy of the dissenting order and the point of difference are required to be sent to Head Office for being laid before the Hon’ble the President for assigning the case to one of the other Members of the Tribunal, and thereupon, law shall take its own course.
Order of the Hon’ble Vice President (Third Member):-
The present two appeals are directed at the instance of the assessees against the separate orders of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 27.02.2024 passed for assessment year 2005-06.
2. It is pertinent to note that originally, AO has passed an assessment order u/s 147 read with Section 143(3) of the Act on 04.12.2012. Ultimately, dispute travelled to the Tribunal in ITA No.673/JP/2014 and C.O. No.
35/JP/2014. The appeal was at the instance of the Revenue and Cross Objection was filed by the assessee. The ITAT, Jaipur has decided the appeal as well as Cross Objections vide its order dated 23.06.2016. The Tribunal has remitted the issues back to the file of AO for re-adjudication. I will be taking note of the finding of the Tribunal in the first round, in the foregoing paragraphs. The AO, thereafter, passed the assessment order on 01.11.2017 u/s 147/143(3) read with Section 254 of the Income Tax Act. The assessee,thereafter filed an application u/s 154 of the Income Tax Act which has been dismissed by the AO vide order dated 17.01.2018. 2.1 The assessee has filed two appeals before the ld. First Appellate Authority, namely, against the assessment order dated 01.11.2017 passed u/s 147/143(3) read with Section 254 and against dismissal of rectification application moved u/s 154 of the Income Tax Act vide order dated 17.01.2018. The ld.CIT (Appeals) has dismissed both the appeals vide impugned order dated 27.02.2024, hence, the assessee is in appeal before the Tribunal.
3. These appeals were heard by a Division Bench, however, both the Hon’ble Members did not concur with their views on the issues involved in the appeals. They have drafted the questions of difference of opinion and forwarded to the Hon’ble President for appointment of a Third Member as contemplated in Section 255 sub-section (4) of the Income Tax Act. The Hon’ble President has appointed me as a Third Member for adjudicating the following questions:
(Question by ld.AM)
Question of law framed pertaining to ITA No. 444 & 450/JPR/2024 for the assessment year 2005- 06 In re: Shri Surender Pal Singh Sahni vs ACIT, Central Circle, Kota:
“Considering the facts and circumstances of the case, the AO while estimating the income as per direction of I TAT in first round should consider the peak during the day without considering the particular day’s credit / debit or he should have taken particular day’s peak credit ignoring the debit transaction of a day to determine peak credit.”
Sd/-
(Rathod Kamlesh Jayantbhai)
Accountant Member
(Question by ld.JM)
The point of difference is specified as under:
As to whether, while applying peak credit theory, A.O is required to consider the peak credit “at the end of the day” OR to consider “the peak amount” having regard to the principles of said theory, and specific observations in the first round by the Co-ordinate IT AT Jaipur Bench that as per accounting principles in case of undisclosed bank account in which cash had been deposited, the AO was required to calculate the peak by merging of all the undisclosed bank accounts.”
4. In the above background, now I take note of the finding of the Tribunal in the first round rendered in ITA No.673/JPR/2014 alongwith C.O.No.35/JPR/2014. The discussion made by the Tribunal has been noted down by the ld. AM and I take note of the findings, which read as under:
“6. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee had submitted that additional income after claiming of standard deduction had been shown at Rs. 15,44,410/-whereas total income disclosed in the belated revised return at Rs. 16,73,352/-. The assessee considered the rental income from the Kirti Nagar, New Delhi flat, Bal Mandir House, Kota, interest from bank and on account of insufficient fund at Rs. 8,71,000/-. It is undisputed fact that four Benami accounts were undisclosed and disclosed first time on 18/4/2011. It is also a fact that the assesseehad depositedunaccounted cash. It is accounting principle that in case of undisclosed bank accounts, in which cash has been deposited, the Id Assessing Officer has to calculate the peak by merging all undisclosed bank accounts for the year under consideration to calculate the maximum income generated by the assessee during the year under consideration. The Id Assessing Officer had made addition on the basis of closing balance, the assessee also not submitted the details of credit and debit entries of all the bank accounts for the year under consideration, therefore, the assessee was also not came with clean hands after evading tax from F.Y. 1997-98 by acquiring Kirti Nagar, New Delhi flat. Thereafter Bal Mandir house, Kota in A.Y. 2001-02. The assessee disclosed shortage of cash as income at Rs. 8,71,000/- but it is not clear where this amount has gone, which is statutory obligation on the part of the assessee to disclose the true and full particulars of income and investment made during the year under consideration. The assessee has not disclosed the name and address of the tenant who had occupied the flat situated at Kirti Nagar, New Delhi. It is not acceptable that without any deed, he had allowed the property on rent. Even the assessee had not disclosed full particulars of income from where he earned the undisclosed income. This question was asked by the Bench at the time of hearing but no positive reply was given by the Id AR of the assessee. Therefore, in absence of full details, the Id Assessing Officer has to decide the assessee’s case on estimated basis. Further the Id CIT(A) also had not passed reasoned order, so that we can conclude that he was justified in deleting the addition made by the Id Assessing Officer. Accordingly, we set aside the order of the Id CIT(A) to the Assessing Officer. The assessee is directed to cooperate with the Assessing Officer and produce all the evidences of ownership of the properties acquired in F.Y. 1997-98, 2001-02 and also during the year under consideration, so that the Assessing Officer can assess the correct income on the basis of peak theory of the bank account as discussed above. Accordingly, the revenue’s appeal is set aside to the Assessing Officer and the appeal is allowed for statistical purposes only. We do not find any merit when CIT(A) has deleted the addition on account of rental account, therefore, CO. of the assessee is dismissed.”
5. A perusal of the record would indicate that short controversy involved in ITA No.444/JPR/2024 is how to quantify the peak credit in alleged four benami accounts owned by the assessee whose cognizance has been taken by the AO by passing the original assessment order. The ld. counsel for the assessee has filed written submissions. He has placed on record maximum peak credit worked out by theAO at page No.37 of the assessment order vis- à-vis peak credit ought to have been worked out by the AO. Let me take note of both the workings, which read as under, namely:
(a) Working made by the AO:
| Date | Particulars | Bank A/c No. | Deposit | Withdrawal | Balance | Narration |
| 05/02/2005 | — | — | — | — | 1341284 | Opening Balance |
| 05/02/2005 | RFRRJV | 1190023337 | 1028000 | — | 2369284 | Transfer |
| 05/02/2005 | RFRRJV | 1190023337 | 549500 | — | 2918784 | Transfer |
| 05/02/2005 | — | 1190023337 | — | 182500 | 2736284 | To Cash-W/S |
| 05/02/2005 | — | 1190023337 | — | 19300 | 2716984 | To Cash-W/S |
| 05/02/2005 | — | 1190023337 | 58000 | — | 2774984 | Special Local Clearing 483906/Union Bank of India |
| 05/02/2005 | RFRRJV | 1190023339 | — | 549500 | 2225484 | TR |
| 05/02/2005 | RSRRJV | 01190023658 | — | 1028000 | 1197484 | Transfer |
(b) Working explained by the assessee ought to have been made:
| Date | Particulars | Bank A/c No. | Deposit | Withdrawal | Balance | Narration |
|---|---|---|---|---|---|---|
| 05/02/2005 | — | — | — | — | 1341284 | Opening Balance |
| 05/02/2005 | RFRRJV | 01190023337 | 1028000 | — | 1341284 | Transfer |
| 05/02/2005 | RSRRJV | 01190023658 | — | 1028000 | — | Transfer |
| 05/02/2005 | RFRRJV | 01190023337 | 549500 | — | 1341284 | Transfer |
| 05/02/2005 | RFRRJV | 01190023339 | — | 549500 | — | TR |
| 05/02/2005 | — | 01190023337 | — | 182500 | 1158784 | To Cash-W/S |
| 05/02/2005 | — | 01190023337 | — | 19300 | 1139484 | To Cash-W/S |
| 05/02/2005 | — | 01190023337 | 58000 | — | 1197484 | Special Local Clearing 483906/Union Bank of India |
6. The ld. counsel for the assessee relied upon his written submission and submitted that while working out the peak credit, the amount of Rs.10,28,000/- available in the Bank Account No. 01190023337 ought to have not been included in the account number ending with digit of 339. He submitted that on 05.02.2005, this sum was available in one of the accounts, which was transferred to account ‘B’ and thereafter re-transferred. Similarly, amount of Rs.5,49,500/- was also available in this account which is only a transfer entry from the other account.
6.1 On the other hand, ld. Sr.DR submitted that accumulated peak in any of the account on a particular day is to be taken into consideration for quantifying the peak balance in the account. He also took me through page No. 37 of the assessment order and submitted that account ending with digit number 339 was having a balance of Rs.13,41,284/- on 03.02.2005. A sum of Rs.10,28,000/- and Rs.5,49,500/- was transferred from account number ending with digit number 337 to this account. Thus, on 05.02.2005, there was a balance of Rs.22,25,484/- and on that very day, sum of Rs.10,28,000/- was withdrawn which was deposited to account ending with digit No. 658.
7. I have duly considered the rival contentions and gone through the record carefully. I deem it appropriate to take note of the complete written submissions filed by ld. counsel for the assessee, which read as under:
“1. That this is second round of appeal. In first round the Hon’ble ITAT vide order dated 23.06.2016 had remitted matter hack to the Id. AO with following directions: –
“Accordingly, we set aside the order of the Id CIT(A) to the Assessing Officer. The assessee is directed to cooperate with the Assessing Officer and produce all the evidences of ownership of the properties acquired in FY. 1997-98, 2001-02 and also during the year under consideration, so that the Assessing Officer-can assess the correct income on the basis of peak theory of the hank account as discussed above. Accordingly, the revenue’s appeal is set aside to the Assessing Officer and the appeal is allowed for statistical purposes only. We do not find any merit when CIT(A) has deleted the addition on account of rental account, therefore. CO. of the assessee is dismissed. (Last 10 lines of Para 6 of ITAT Order) ”
2. Based on directions of Hon’ble ITAT the Id. AO worked out peak credit of all 4 Bank Accounts. His working is spread from page 27 to 39 of Assessment Order.
3. He has worked out maximum peak credit on 05.02.2005. His working of 05.02.2005 is at page 37 of Assessment Order which is reproduced as under:
| Date | Particulars | Bank A/c No. | Deposit | Withdrawal | Balance | Narration |
|---|---|---|---|---|---|---|
| 05/02/2005 | — | — | — | — | 3412841 | Opening Balance |
| 05/02/2005 | RFRRJV | 1190023337 | 1028000 | — | 2369284 | Transfer |
| 05/02/2005 | RFRRJV | 1190023337 | 549500 | — | 2918784 | Transfer |
| 05/02/2005 | — | 1190023337 | — | 182500 | 2736284 | To Cash-W/S |
| 05/02/2005 | — | 1190023337 | — | 19300 | 2716984 | To Cash-W/S |
| 05/02/2005 | — | 1190023337 | 58000 | — | 2774984 | Special Local Clearing 483906/Union Bank of India |
| 05/02/2005 | RFRRJV | 1190023339 | — | 549500 | 2225484 | TR |
| 05/02/2005 | RSRRJV | 01190023658 | — | 1028000 | 1197484 | Transfer |
4. The ld. AO worked out Rs.29,18,784/- as maximum peak credit and taxed it.
5. Aswhile working out peak credit the Id. AO failed to appreciate this fact that amounts of Rs. 10,28.000 – and Rs.5,49o00/- were not fresh cash credit but transfer from one bank account to another and therefore these were to be ignored by Id. AO while making working of peak and also he grossly erred in taking only one side of transfer entry and ignored other side while working out maximum taxable peak credit an appeal was filed before the Hon’ble CIT(A) who dismissed it.
6. Being aggrieved we were before Hon’ble ITAT. Our Ground of Appeal before Hon’ble ITAT was as under: –
“That under the facts and circumstances of the case and in law the Hon’ble CIT (A) Udaipur erred in holding that based on four bank accounts and ignoring other incomes the addition made by the Ld. AO at Rs. 2918784/- is justified as against Rs 1197484/- which is verifiable from working of Ld. AO also. Addition of Rs. 2918784′- therefore needs substitution to Rs 1197484/- i.e. relief of Rs. 1721300/-. We therefore pray for relief of Rs. 1721300/-. “
7 (i) As learned AO while computing peak credit had taken into consideration transfer entries and also considered only one side of transfer entry and ignored other side we moved an application u/s 154 to ld. AO who rejected it. Aggrieved we filed an appeal before Hon’ble CIT(A) who dismissed it. Being aggrieved we were in appeal before Hon’ble ITAT. (ii) GOA1 of our appeal reads as under: – “That under the facts and circumstances of the case and in law the Hon’ble CIT (A) Udaipur erred in holding that on basis of peak credit theory of four bank accounts the correct amount work out should be Rs. 2918784/-only and not Rs. 1197484/-. We pray for its substitution to Rs. 1197484.”
8. As issue involved in appeal against order u/s 143(3) – ITA No.444/JP/2024 and appeal against order u/s 154 – ITA No.450/.IP/2024 were common we had made our consolidated written submission and with permission from Hon’ble Bench had argued both appeals together.
9. Before Hon’ble Bench our submission was that while working out peak credit ld. AO was expected to ignore transfer entries/contra entries. Had he placed both sides of transfer entries together he could have not confused. We in our written submission re-worked out transactions of 05.02.2005 which are reproduced as under: –
Thereby after ignoring these two transfer entries the peak balance would have been brought back to opening balance o f the day Rs. 1341284and peak balance on 05.02.2005 at Rs. 1197484/-.
10. In short summary of our submission was that entries of Rs. 1028000/- and Rs.549500/- were not deposits/withdrawals but transfers from one Bank Account to another. During hearing at one point the Hon’ble AM during his submission interrupted ld. DR and said that these are like transfer from one plate to another. As explained above after giving effect to these two transfer entries amounting to Rs. 15,77,500/- (1028000+549500) balance comes back to Closing Balance of 03.02.2005/ Opening Balance of 05.02.2005 Rs. 13,41.284/- but as the ld. AO had taxed peak of 05.02.2005 and on 05.02.2005 peak was Rs.l 1,97,484/- therefore we had prayed for relief of Rs.l 7,21,300/-(2918784-1197484) as against Rs.l5,77,500/- (1028000+549500).
11. Sir. as appears from our GOA, nowhere we have requested for taking peak balance on close of the day. Throughout in relation to GOA1 of 143(3) order as well as GOA1 of 154 order our stress was that transfer entries/ contra entries are not part of peak credit which we had explained through modified chart also. Besides our submission was that the ld. AO has considered only one part of the transfer entry unjudicially and has ignored other part of the transfer entry and therefore considering another part of the transfer entry relief of Rs.l5,77,500/- (1028000+549500) be given.
Our request was that after relief of Rs.l577500/- peak credit on 05.02.2005 shall be Rs.l 197484/-. Peak credit of Rs.l 197484/- happens to be on end of the day. Being satisfied with our arguments the Hon’ble AM decided ground in our favour holding that peak credit should be taken on end of the day.
12. The Hon’ble JM decided GOA1 as under: –
“Nowhere, it has been provided that peak credit is taken at the end of the day. Learned AR for the assessee has also not referred to any provision which so stipulates. In the given facts and circumstances, I do not find any merit in the contention on behalf of the assessee is that while working out peak credit, peak credit is taken “on the end of the day, or that having regard to the two transfer entries, the balance at the end of the day i.e. 5.2.2005 would have been Rs 11,97,484/-, and as such the disputed amount addition be substituted with this amount. As a result of the above discussion, grounds No. 1 and 2 raised on behalf of the assesseedeserves to be rejected. “
13. This has resulted in point of difference amongst both the Members. Question of law and point of difference raised by both the Members are as under: – ITANos.444 and 450/JP/2024 Question of Law and point of difference The point of difference is specified as under: -“
As to whether, while applying peak credit theory, A.O is required to consider the peak credit “at the end of the day” OR to consider “the peak amount” having regard to the principles of said theory, and specific observations in the first round by the Co-ordinate ITAT Jaipur Bench that as per accounting principles in case of undisclosed bank account in which cash had been deposited, the AO was required to calculate the peak by merging of all the undisclosed bank accounts” Sd- (Narinder Kumar) Judicial Member Question of law framed pertaining to ITA No.s.444 & 450/.IP/2024for the assessment year 2005- 06in re: Shri Surender Pal Singh Salmi Vs. ACIT, Central Circle, Kota. Considering the facts and circumstances of the case, the AO while estimating the income as per direction of ITAT in first round should consider the peak during the day without considering the particular day’s credit/debit or he should have taken particular day’s peak credit ignoring the debit transaction of a day to determine peak credit.
Sd/-
(Rathod Kamlesh Jayantbhai)
Accountant Member “
14. Sir in first round of appeal the Hon’ble Bench has referred matter back to ld. AO to assess correct income on basis of peak theory. In our grounds of appeal as well as our arguments your honour will find that we have never mentioned that peak should be on close of the day. Our submission through out was that on 05.02.2005 while working out peak credit the learned lower authorities have grossly erred in taking transfer entries from one bank account to another as peak credits and also considered only one part of transfer entries ignoring other part and thereby computed peak credit incorrectly. Sir after ignoring both transfer entries while working out peak credit or considering other part of the transfer entry will bring back peak credit to Rs.l3,41,284/- which is opening balance of 05.02.2005 and closing balance of 03.02.2005. However, as Id. AO had taxed peak credit of 05.02.2005 we had argued to tax Rs. 11,97,484/- which happens to be peak credit on end of 05.02.2005. Our this submission has been accepted by Hon’ble AM. We request your honour to please give direction for ignoring transfer entries from one Bank account to another bank account while computing peak credit which will bring peak credit to Rs.l 1,97,484/-as against Rs.29.18,784A worked out by ld. Lower Authorities and sustained by Hon’ble JM.
Submitted
Sd/-
(C.M.Birla) A/R
7.1 It is pertinent to note that peak is to be determined by keeping in mind the following steps:
Determination of peak Credit
“1. All the cash deposits withdrawals, owned up by the assessee as undisclosed, are placed in chronological order.
2. The balances are drawn against each deposit and withdrawal.
3. The deposit in the first entry becomes closing balance against that first entry. 4 This closing balance of first entry becomes opening balance for second entry.
5. Deposit or withdrawal of the second entry is adjusted to the opening balance.
6. Then closing balance against the second entry is drawn.
6. This closing balance of second entry becomes opening balance of the third entry and so on.”
8. In the light of the above, if I peruse the assessment order, then it would reveal that on 03.02.2005, a sum of Rs. 13,41,284/- is being shown as closing balance of all the four merged undisclosed bank accounts while working out the peak credit. On 05.02.2005, there are two deposits in account number ending with digit ‘337’ for Rs. 10,28,000/- and Rs.5,49,500/- respectively which are nothing but transfer from other two undisclosed bank accounts of the assessee. The amount of Rs. 10,28,000/- is transfer from account number ending with digit ‘658’ whereas the amount of Rs.5,49,500/- is transfer from account number ending with digit ‘339’. The peak credit balance at the end of the day is Rs. 11,97,484/-. These two entries of Rs. 10,28,000/- and Rs.5,49,500/- are merely contra entries which is mere transfer from two undisclosed bank accounts to third undisclosed bank account of the assessee. The transaction is nothing but, in effect, shifting of money from one pocket to another pocket of the assessee. In net effect, the same would not, at all, affect the working of peak credit. In such a case, in my considered opinion, the closing balance of 05.02.2005 which is Rs. 11,97,484/- is to be taken as peak credit balance for the purpose of computations. Therefore, I concur with the ld. A.M.
9. As far as ITA No. 450/JPR/2024 is concerned, the ld. AM has reduced the total peak worked out by the AO and treated this appeal as academic in nature. Similarly, ld. JM has observed that it does not call for adjudication. In my opinion, the substantial issue is involved in the main quantum appeal and there is no error committed by the AO which deserves to be rectified. The quantification of peak credit is a substantial issue which is depending upon the outcome of an appeal. Accordingly, there was no apparent error in the order of the AO which deserves to be rectified.
10. Since there is no question of difference, substantially framed by the Hon’ble Members which could be answered by me, accordingly, I desist myself from giving any opinion as far as ITA 450/JPR/2024 is concerned. Order pronounced on 13.03.2026.
Sd/-
(RAJPAL YADAV)
VICE PRESIDENT
3. Final Disposal of the appeal:-
ITA No.444/JPR/2024
In accordance with the majority opinion, comprising the opinion of the Hon’ble Accountant Member and the Hon’ble Third Member, the appeals are decided as under:-
Ground No.1 and 2
Hon’ble AM:- “The peak should be worked out at the end of the working day and not on mid. Considering that aspect of the matter and since there is no dispute as to the computation of peak, we direct the ld. AO to consider the peak on the end of the day which amounts to Rs. 11,97,484/- considering that aspect of the matter. Ground Nos. 1 & 2 raised by the assessee are allowed.”
Hon’ble Vice President (Third Member):- “In my considered opinion, the closing balance of 05.02.2005 which is Rs. 11,97,484/- is to be taken as peak credit balance for the purpose of computations. Therefore, I concur with the ld. A.M.”
Therefore, Ground No. 1 and 2 are accordingly allowed.
Ground No.3
There was no dissenting view of both the Members who had originally passed the order and ground No.3 therefore, stands allowed in accordance with the concurring view of both the Members. In effect, the appeal of the assessee in ITA No.444/JPR/2024 stands allowed. ITA No.450/JPR/2024 The substantial question raised being answered in favour of the assessee in the main appeal by the majority view of the Hon’ble Accountant Member, the Hon’ble Third Member and the present appeal is mere academic in nature as held by the Hon’ble Accountant Member. The Hon’ble Third Member has stated that there was no question of difference on the issue raised in this appeal which could be answered by the Hon’ble Third Member.
Therefore, the appeal of the assessee in ITA No.450/JPR/2024 stands disposed off in the above terms.
4. Conclusion:-
In the combined result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 28.09.2026.
