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2017 (4) TMI 1441 - AT - Income TaxAddition u/s 69A - peak credit addition - cash deposits as well as cash withdrawals in his bank account with Axis Bank accounts with Pudukkottai and T. Nagar Branch - HELD THAT - AO had listed out the major transactions in assessment order, a date wise analysis of the bank accounts were not done. Assessee can always say that cash deposits in the bank account had come out of an earlier cash withdrawal as long as the time interval between the withdrawals and deposits are not so significantly substantial to disbelieve the source. Whether the assessee was carrying on any money lending business, has no relevance when an assessment is made considering the amounts deposited in the bank accounts. In our opinion cash deposits alone cannot be the subject of an addition ignoring the cash withdrawals. Hence, finding of CIT (Appeals) that peak credit alone could have been considered for the addition cannot be faulted. In so far as transactions other than cash are concerned, it may be true that assessee was earning commission from money lending. CIT (Appeals) that assessee was earning 1% commission of the deposits in the bank account was only a surmise. Even if there were some commission earnings it gets subsumed in the peak credit considered for addition. The further addition was not justified in the fact and circumstances of the case, such addition stands deleted.
Issues Involved:
1. Determination of the source of deposits in the assessee's bank accounts. 2. Validity of the addition of cash deposits as unexplained income under Section 69A of the Income Tax Act. 3. Application of the peak credit principle. 4. Assessment of commission income from money lending activities. Issue-wise Detailed Analysis: 1. Determination of the source of deposits in the assessee's bank accounts: The assessee filed a return of income disclosing ?3,10,500/- as income from commission on money lending. The Assessing Officer (AO) noted that the assessee had deposits aggregating ?3,67,75,800/- in his bank accounts and required the assessee to show the source of these deposits. The assessee explained that the deposits were from money lending activities, but did not maintain detailed records of the transactions or the persons involved. The AO found discrepancies in the confirmation letters provided by the assessee and concluded that the assessee failed to produce satisfactory evidence for the transactions. 2. Validity of the addition of cash deposits as unexplained income under Section 69A of the Income Tax Act: The AO treated the entire cash deposits of ?3,67,75,800/- as unexplained income and made an addition under Section 69A of the Income Tax Act, citing the assessee's inability to substantiate the source of the deposits. The AO relied on the judgments of the Hon'ble Apex Court in Kale Khan Mohammad Hanif vs. CIT and Roshan Di Hatti vs. CIT, which place the onus on the assessee to prove the source of the money. 3. Application of the peak credit principle: The Commissioner of Income Tax (Appeals) [CIT(A)] held that the AO erred in considering only the credits in the bank account without accounting for the debits. The CIT(A) applied the peak credit principle, which limits the addition to the highest balance in the bank account during the year, resulting in an addition of ?18,12,888/-. The CIT(A) also added 1% of the total deposits as commission income, amounting to ?3,67,758/-, leading to a total addition of ?21,80,646/-. 4. Assessment of commission income from money lending activities: The AO and the CIT(A) both acknowledged the assessee's money lending activities. However, the CIT(A) determined that the assessee earned a commission of 1% on the total deposits, which the assessee disputed. The Tribunal found that the CIT(A)'s finding on the commission income was speculative and unsupported by evidence. The Tribunal concluded that any commission income would be subsumed in the peak credit addition of ?18,12,888/- and deleted the further addition of ?3,67,758/-. Conclusion: The Tribunal upheld the CIT(A)'s application of the peak credit principle, limiting the addition to ?18,12,888/-, and deleted the additional commission income of ?3,67,758/-. Thus, the appeal of the Revenue was dismissed, and the assessee's appeal was partly allowed. The final addition stood at ?18,12,888/-. Order Pronouncement: The order was pronounced on Wednesday, the 5th day of April, 2017, at Chennai.
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