2017 (8) TMI 1532 - AT - Income Tax

Unexplained cash credit - Addition on peak credit basis - Additions in the hands of the assessee HUF - HELD THAT - Cash credit computed by the CIT(A) is not appropriate because he has adopted the cumulative cash deposited in the bank account as the peak credit. The computation of peak credit by the AO is appropriate because he has computed the peak credit based on the peak credit of the assessee on any given point of time in the bank account during the relevant assessment year. The assessee has not produced any evidence before us to establish that the cash credit made in the bank account of the assessee was from the jewel loan and cash withdrawal from the cash credit account maintained with the bank. Therefore no merit in the argument advanced by the assessee on that regard. Considering the status of the assessee which is a HUF wherein there are other co-parceners whose financial position should also be considered while making such additions in the hands of the assessee HUF, hereby remit the matter back to the file of Ld.AO for fresh consideration. Assessee's appeal allowed for statistical purposes

Summary

Issues: Delay in filing appeal, Addition on peak credit basis, Peak credit computation, HUF status and co-parceners.

Delay in filing appeal:
The appeal was filed by the assessee with a delay of 42 days. The assessee requested condonation of the delay, citing oversight as the reason for missing the due date. The Ld.AR argued for condonation, emphasizing the merits of the case. The Ld. DR objected to the delay. The tribunal, acknowledging the lethargic attitude of the assessee, decided to condone the delay in the interest of justice. The appeal was then heard on its merits.

Addition on peak credit basis:
The core issue revolved around the addition made by the Ld.AO and further enhanced by the Ld.CIT(A) on peak credit basis. The assessee, a HUF engaged in tanker lorry operations and trading, had undisclosed cash deposits in a bank account. The Ld.AO considered these deposits as unaccounted income, leading to an initial addition of &8377; 23,14,320. The Ld.CIT(A) increased this amount to &8377; 38,22,700. The assessee contended that the deposits were from jewel loans and cash withdrawals from a credit account, disputing the peak credit computation by the Ld.CIT(A).

Peak credit computation:
The tribunal found the Ld.CIT(A)'s computation of peak credit based on cumulative cash deposits to be inappropriate. In contrast, the Ld.AO's calculation, considering the peak credit at any given point in the bank account during the assessment year, was deemed more suitable. The tribunal noted the lack of evidence from the assessee to support the claim that the cash deposits were from jewel loans or cash withdrawals. Despite this, recognizing the HUF status and the financial positions of co-parceners, the tribunal remitted the matter back to the Ld.AO for fresh consideration.

HUF status and co-parceners:
Given the HUF status of the assessee and the presence of co-parceners, the tribunal highlighted the importance of considering the financial positions of all members while making additions to the HUF's income. This factor played a significant role in the decision to send the matter back to the Ld.AO for reevaluation.

In conclusion, the tribunal allowed the appeal of the assessee for statistical purposes, remitting the issue of peak credit computation back to the Ld.AO for a fresh assessment. The judgment emphasized the need for proper consideration of peak credit and the financial dynamics within an HUF while determining additions to income.