2014 (7) TMI 1283 - AT - Income Tax

Addition u/s 69A - unexplained source of cash deposits and deposits through cheques in the bank - peak credit addition - admission of the additional evidence by CIT-A in restricting addition - Held that - AO should have no objection if the additional evidence was entertained by the ld. CIT(A) as the same was first sent to him for verification. If he was not satisfied with the correctness of the assessee s claim in the light of such fresh evidence he could have controverted the same. AO chose to pick up deposit side of the bank accounts totaled the same and made addition for the equal sum without giving benefit of the amounts withdrawn. In other words certain amounts were withdrawn then deposited again withdrawn and re-deposited. When the position is such that there are certain debits and credits in the bank account it is wholly impermissible to consider only the deposits in the bank account for the purposes of making addition by totaling ignoring the fact that there are withdrawals of the amount as well. In such a situation it is a peak amount which is required to be added which exactly has been done by the ld. CIT(A) in this case. The ld. DR could not point out any infirmity in the calculation of the peak amount by which the ld. CIT(A) restricted the addition to 2.80 lac. We therefore uphold the impugned order. - Decided against revenue

Summary

Issues:
- Addition made on account of AO u/s 69A of the Income-tax Act, 1961

Analysis:
The case involved an appeal by the Revenue against the CIT(A)'s order regarding the assessment year 2007-08, specifically focusing on the addition of Rs. 1,14,74,500 made under section 69A of the Income-tax Act, 1961, which was later restricted to Rs. 2,80,000 by the CIT(A). The assessee claimed that cash deposits in the bank account were from an NRI, Ms. Vandana Chandra, for investment purposes. The AO treated the total credit entries in the bank accounts as unexplained money. During the appellate proceedings, the assessee submitted additional evidence, including bank statements, passport copies, and affidavits related to Ms. Vandana Chandra's investments. The CIT(A) admitted this evidence and found that the source of deposits was explained by the assessee, leading to the restriction of the addition to Rs. 2,80,000. The Revenue challenged this decision.

Upon reviewing the case, the ITAT observed that the assessee initially did not cooperate with the AO during the assessment but later provided relevant evidence to the CIT(A). The AO did not dispute the evidence but objected to its admission. The ITAT opined that the AO should have raised objections during the verification process if unsatisfied. Regarding the merits, the AO only considered deposits without accounting for withdrawals, resulting in an inflated addition. The ITAT emphasized that both withdrawals and deposits should be considered, leading to the identification of the peak amount for addition, as done by the CIT(A) in restricting the addition to Rs. 2.80 lakh. The ITAT found no fault in the CIT(A)'s calculation and upheld the decision, ultimately dismissing the appeal brought by the Revenue.

In conclusion, the ITAT affirmed the CIT(A)'s order, highlighting the importance of considering both withdrawals and deposits in bank accounts for determining additions under section 69A. The ITAT emphasized the necessity of peak amount analysis and supported the decision to restrict the addition to Rs. 2.80 lakh based on the evidence provided by the assessee.