2017 (5) TMI 1790 - AT - Income Tax

Unexplained deposits in bank accounts - main grounds are with reference to considering the peak of the amounts as taxable and not each and every individual deposits as there were withdrawals as well - HELD THAT - Admittedly Assessee is not in a position to justify fully the large number of deposits. Assessee before CIT(A) furnished certain sources for cash deposits and withdrawals particularly amounts borrowed by cheques and drawn in cash. Considering that there is no allegation that Assessee has made unexplained investments and/or indulging any business there is nothing on record to say that the withdrawals cannot be a source of subsequent deposits. In these circumstances Assessee request for bringing to tax the peak credits can be accepted. Even though this working is not verifiable by us in the absence of complete details of domestic expenditure or expenditure which is in nature of outgoing out of the withdrawls and the Receipt-Payment statement. Since this aspect was not examined by A.O we set aside the issue to the file of the A.O to examine the peak credit based on receipts and payments statement of Assessee and the consolidated deposits and withdrawals in the five banks and to bring to tax only the amount of peak credit / deficit cash as the case may be. Assessee should be given due opportunity by AO to file necessary details. The grounds raised by Assessee are accordingly considered allowed.

Summary

Issues:
Taxability of deposits in bank accounts - whether to consider the peak amount or individual deposits for taxation.

Analysis:
The appeal was filed by the Assessee against the order of CIT(A)-2, Hyderabad regarding the taxability of an amount of Rs. 1,03,28,500/- deposited in bank accounts during the year. The Assessee argued that only the peak amount should be considered taxable, not each individual deposit due to withdrawals made as well.

The Assessee, a Vice President of a company, had income from various sources and filed a return of Rs. 7,20,241/-. However, the assessment determined taxable income at Rs. 2,47,61,970/-, including the disputed deposits in Axis Bank and Andhra Bank. The Assessee failed to explain the source of these deposits, leading to the entire amount being taxed by the Assessing Officer.

Before the CIT(A), the Assessee provided additional details, including receipts and payments statements, and requested acceptance of the explanation. The CIT(A) rejected the Assessee's contentions, stating that there was no nexus between the withdrawals and deposits. The CIT(A) upheld the addition of Rs. 1,03,28,500/-, dismissing the Assessee's appeal.

In the subsequent appeal, the Assessee raised multiple grounds challenging the CIT(A)'s decision. The Assessee argued that only the peak credit should be taxed, not the aggregate deposits. The Assessee referred to the peak credit amount of Rs. 19,93,800/- and requested its confirmation.

After considering the arguments and case laws presented by both parties, the ITAT decided that the Assessee's request to tax only the peak credits was acceptable. The ITAT found that the Assessee had provided some sources for the cash deposits and withdrawals, and there was no evidence of unexplained investments or business activities. Therefore, the issue was remanded back to the Assessing Officer to examine the peak credit based on the receipts and payments statements. The ITAT allowed the Assessee's appeal for statistical purposes.

In conclusion, the ITAT directed the Assessing Officer to reevaluate the taxability of the deposits, considering only the peak credit amount and giving the Assessee an opportunity to provide necessary details for assessment. The appeal was allowed in favor of the Assessee for statistical purposes.