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Issues involved: Determination of unexplained cash deposits in the bank account u/s 143(3) of the Income Tax Act, 1961 for Assessment Year 2005-06.
Assessing Officer's Findings: The Assessing Officer treated the entire cash deposits of Rs. 27,55,000/- in the assessee's bank account as unexplained, adding it to the income of the assessee based on lack of verifiable opening cash in hand and absence of balance sheet and capital accounts for earlier years. Assessee's Appeal before CIT(A): The assessee contended that all cash deposits were explained by existing balances and income sources, denying the existence of unexplained cash deposits. The appellant argued against the application of 'peak' theory and emphasized the availability of sufficient cash balance on deposit days. CIT(A) Decision: The CIT(A) found the appellant's explanations inadequate, treating the 'peak' of deposits and withdrawals as unexplained income to ensure fairness. The peak cash balance was determined at Rs. 15,12,225/-, replacing the original assessment amount of Rs. 27,55,000/-. Appellate Tribunal Decision: The Tribunal rejected the CIT(A)'s peak cash balance determination, calculating unexplained cash deposits at Rs. 5,80,000/- after considering the absence of evidence for the opening cash balance. The appeal was partly allowed, directing the Assessing Officer to adopt the revised figure. Conclusion: The Tribunal partially allowed the appeal, reducing the unexplained cash deposits to Rs. 5,80,000/- from the initial assessment of Rs. 27,55,000/-, emphasizing the importance of providing supporting evidence for cash transactions to avoid discrepancies in income tax assessments.
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