1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR <<>> :: ORDER :: Pawan Kumar Pareek Vs. Income Tax Officer, Ward 2 (2) Jodhpur & Anr. D.B.INCOME TAX APPEAL NO.34/2010. ... Date of Order :::: 29th September 2010 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE C.M. TOTLA Mr.L.M.Lodha for the appellant <><><> BY THE COURT: (Per Dinesh Maheshwari, J.) By way of this appeal under Section 260-A of the Income Tax Act, 1961 ['the Act'], the appellant-assessee seeks to challenge the judgment and order dated 16.12.2009 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ['the Tribunal'] in ITA No.161/JU/2009 whereby the Tribunal affirmed the judgment and order dated 05.03.2009 passed by the Commissioner of Income Tax (Appeals), Jodhpur ['the CIT(A)'] dismissing the appeal filed against the assessment order dated 03.12.2008 for the assessment year 2006-2007. Put in brief, the relevant background aspects of the matter are that the appellant-assessee, an individual carrying on business in his proprietorship concern and dealing in 2 Mateera seeds, filed a return declaring income of Rs.87,360/- on 08.01.2007. The case was processed under Section 143 (1) of the Act, was selected for scrutiny and a notice under Section 143 (2) of the Act was issued to the appellant on 18.06.2007. Despite service, none on behalf of the assessee attended the hearing before the Assessing Officer ['the AO']. The AO gathered that the assessee had deposited in the bank account a sum of Rs.14,13,350/- in cash during the relevant financial year and to ascertain the source of this cash, the assessee was given repeated notices under Section 142(1) and 143 (2) of the Act but he failed to submit the requisite explanation. According to the AO, on 19.09.2007, one representative appeared on behalf of the assessee and sought adjournment but did not file any power of attorney. The case was, however, adjourned to 24.09.2007; but even on the stipulated date, none attended on behalf of the assessee nor any reply was filed. The AO pointed out that yet further notices were issued under Section 143 (2) of the Act but the assessee failed to submit reply. The AO further pointed out that finally, on 21.11.2008, the assessee was issued letter No.2328 whereby he was specifically informed that even after sufficient opportunities, he had not attended on any date and was not co-operating with the Department; and the case was fixed for hearing on 28.11.2008. The AO, after pointing out various notices issued to the assessee and his failure to reply, observed that the assessee failed to submit the source of cash deposited in his account maintained with IDBI Bank, Mumbai. The said amount was taken to be undisclosed income earned 3 from undisclosed sources. The AO completed the assessment taking the said cash deposited in the Bank as undisclosed income of the assessee and issued consequential orders. In appeal before the CIT(A), it was contended on behalf of the appellant-assessee that the assessment order passed under Section 144 of the Act was bad in law and on facts; that notices issued under Sections 142 (1) and 143 (2) of the Act were not properly served; that the assessment order was a non-speaking one; and that addition of income was not justified. The learned CIT(A) found that the assessee could dare not deny specific assertion of the AO regarding service of notices and rejected the contention regarding want of proper service. The learned CIT(A) also found that the AO had elaborately discussed the details of deposit as well as the reasons for treating the same as undisclosed income; and rejected the contentions in that regard too. It was also contended before the CIT(A) that the sources of subsequent deposits were withdrawals from the bank account and no new asset was created; and the peak credit of the earlier year was more than the peak credit during the current year and hence, no further addition was required. The learned CIT(A) rejected such contentions with the observation that despite multiple opportunities, the assessee did not furnish requisite details regarding deposits made in the bank account and no new evidence could be suggested in the appellate proceeding. Taking an overall view of the matter, the learned CIT (A) found no reason to interfere. 4 In further appeal before the Tribunal, again, the validity of service of notices was put to question. It was also contended that the peak credit should have been considered instead of addition of the entire amount of deposit. It was further contended that the CIT (A) ought to have allowed additional evidence. After hearing the parties, the Tribunal found the contentions urged on behalf of the appellant- assessee devoid of substance. The contention regarding want of service was rejected by the Tribunal while observing thus: “5. We have heard the parties and have carefully perused the material on record. A perusal of the departmental record laid before us reveals that the appellant adopted non-cooperative attitude at assessment stage despite repeated number of notices u/s. 142(1) and 143(2) of the Act having been sent by registered post and also by Speed Post that stand served upon him. Even the last notice dated 21.11.2008 issued u/s. 142(1) and 143(2) of the Act listing the case for hearing on 28.11.2008 are shown to have been served by Speed Post on the address of the appellant. The assessee merely makes an oral submission that no notices have been served. An affidavit to this effect has neither been laid before us nor shown to have been filed before any of the authorities below. The oral denial, as such, is not bonafide. The assessee's claim, therefore, that the notice issued have not been served is found rightly rejected by the ld. CIT (A).” The Tribunal found the assessment under Section 144 of the Act justified after referring to the relevant provisions thereof that read as under:- “144(1). If any person - (a) fails to make the return required under sub- section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub- section (5) of that section, or (b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or 5 (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143. the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment : Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon he assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment : Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.” In regard to the core issue of addition, the Tribunal found the stand of the appellant rather contradictory and observed thus: “14. In order to render substantial justice to the assessee, we, however, allowed the assessee to show as to how the addition for peak credit was necessary instead of the addition as unexplained deposits in the said bank account. The assessee, however, laid no cogent material or reliable documentary evidence to substantiate the claim that the deposits made in his bank account, allegedly, from the sale realization of his goods stood withdrawn and utilized either for making purchases for future sales coming to the same account or re-deposited in cash after making withdrawals there from. In fact, the bank statement reveals that on various dates, cash is deposited at outstations, such as Kanpur, Delhi, Indore, Patiala, Bhuvneshwar, Jalandhar and various other cities spread over in different states and after making the deposits, the amounts are withdrawn either on the same day or immediately on the next day, without establishing any nexus that the same amount has been re-deposited at such outstations on subsequent dates. The assessee's explanation, in fact is contradictory inasmuch as on one hand he says that the amount withdrawn on a particular date stands deposited in the same account while on the other hand, he claims that the amounts deposited at outstations in various cities are the collection from sale proceeds. In this view of the matter, the explanation given by the assessee being untrue cannot be accepted requiring to adopt a peak credit 6 with respect to unexplained credit and debit entries in his bank account with IDBI branch at Mumbai. Therefore, the decision by Hon'ble M.P. High Court rendered in the case of Jhamatmal Takhatmal Kirana Merchants vs. CIT, (1999) 152 CTR (MP) 311 and of Rajasthan High Court in the case of Swaroop Chand Kojuram, 235 ITR 732 (Raj.) relied upon by the Revenue are found relevant to the facts of the present case. The decision in the immediate preceding year in his case for A.Y. 2005-06 is found rendered under different facts and circumstances, where the ld. CIT (A) while accepting the peak credit theory for deposit and withdrawals in the same account, has acted on the remand report and relevant material which is found absent here in this case. Finding no merit in the grounds raised by the assessee, the same stand rejected.” Seeking to assail the order so passed by the Tribunal, the learned counsel for the appellant-assessee has strenuously argued that the learned authorities below and the Tribunal have proceeded on entirely irrelevant considerations and on a wrong approach towards the operation of Section 144 of the Act. The learned counsel submitted that if at all taking up the best judgment assessment under Section 144, it was required of the AO to take into account all the relevant material gathered and to afford the assessee an opportunity of being heard before making the final assessment. The learned counsel contended that the opportunity envisaged under Section 144 having not been given, the assessment is rendered invalid. According to the learned counsel, in the ordinary circumstances where a case is covered under clause (b) of sub-section (1) of Section 144, service of notice may not be necessary as per the second proviso to Section 144(1) but in the cases of other nature, before proceeding ex parte and before completing the assessment under Section 144, a 7 notice is required to be given. The learned counsel submitted that there had not been any cogent evidence before the AO to make addition of the entire amount of Rs.14,13,350/- as undisclosed income of the appellant. The learned counsel submitted that at the most, peak credit could have been taken into consideration while making best judgment assessment; and the entire of alleged amount deposited in the bank could not have been treated to be his undisclosed income. The learned counsel has referred to and relied upon the decisions in Dhanalakshmi Pictures Vs. Commissioner of Income-Tax, Madras: 144 ITR 452 and Commissioner of Income Tax Vs. Ranjeet Kumar Sethia: (2005) 198 CTR (Raj) 550. Having given a thoughtful consideration to the submissions made, we are unable to find any substance in this appeal; and we are clearly of opinion that this appeal, being totally bereft of substance, does not merit admission. So far the interpretation as suggested by the learned counsel to Section 144 is concerned, the same has only been noted to be rejected. The suggestion remains squarely contrary to the plain provisions of statute. The scheme of Section 144(1) makes it explicit and evident that upon the person concerned failing to make return, or failing to comply with the terms of notice issued under Section 142 (1) or direction under Section 142 (2A), or failing to comply with the directions of notice under Section 143 (2), the AO shall, after taking into account all the relevant material gathered and after giving the assessee an opportunity of being heard, make the 8 assessment of total income to the best of his judgment. As per the first proviso to Section 144(1), the opportunity is to be given by the AO by serving a notice calling upon the assessee to show cause as to why assessment should not be completed to the best of his judgment on a given date. However, the second proviso thereof makes it clear that it shall not be necessary to give such an opportunity in the case where a notice under Section 142 (1) had been issued prior to making of assessment. Hence, where the notice under Section 142 (1) was given and the assessee failed to comply with the same, in our opinion, the second proviso to Section 144(1) clearly came in operation and it was never necessary for the AO to go on servicing further notices on the assessee. The fact situation of the present case makes it clear that even under Section 143 (2), repeated opportunities were extended by the AO by serving at least 9 notices of different dates. The appellant-assessee having failed to co-operate with the Department and having failed to come out with explanation, as per the second proviso to Section 144(1), the AO was not at all obliged to have issued him yet another notice. In regard to the decision in Dhanalakshmi Pictures (supra) as relied upon by the learned counsel for the appellant, suffice is to point out that the said decision, rendered on 03.09.1980 and relating to assessment years 1971-1972, had been in relation to the then existing provisions of Section 144 of the Act whereas the provisos came to be inserted thereto only by way of the amendment made by the Direct Tax Laws (Amendment) Act, 1987 (No.4 of 1988). The said decision can have no 9 relevance for the purpose of interpretation of Section 144 as now existing. So far the merits of the case are concerned, we do not find any infirmity in the order passed by the AO as affirmed by the Appellate Authorities for the basic reason that the appellant failed to account for the cash deposit in IDBI Bank, Mumbai, being the sum of Rs.14,13,350/-. We are unable to see any logic in reference to the peak credit theory in the present case; and the decision in Ranjeet Kumar Sethia (supra) has hardly any application or relevance to the present case. The feeble explanation as sought to be suggested before the Appellate Authorities has been found to be more of contradiction as indicated by the Tribunal in its judgment, particularly in the passage quoted hereinbefore. The contentions sought to be urged on behalf of the appellant fail and are rejected. Accordingly and as a result of the discussions aforesaid, we do not find any substantial question of law being involved in the present case. The appeal fails and is, therefore, dismissed summarily. (C.M. TOTLA), J. (DINESH MAHESHWARI), J. MK