2016 (7) TMI 70 - HC - Income Tax

Addition under Section 68 - Held that - The materials on record would suggest that admittedly, the assessee had maintained two bank accounts, not disclosed to the Revenue authorities. In such bank accounts, multiple cash deposits were made by the assessee from different places. The assessee initially explained that such deposits were made by his friends and he, in turn, would withdraw the amounts at Ankleshwar and handover the cash to the friends for a small commission. He, however, refused to supply details of such friends. Before the Tribunal, however, the assessee adopted the entirely novel theory of being engaged in the business of chemical and the deposits being part of his business transaction. First and foremost, this theory of the assessee s of the amounts belonging to his friends would be incongruent. If these amounts were established to be belonging to the friends of the assessee, for whom, he merely deposits the sums and withdraw at their requests for a small commission, the question of applicability of peak credit would not arise. When the assessee failed in his first attempt, he came up with the novel theory of the amounts being for the purpose of his chemical business. This theory probably was pressed in service to enable the assessee to seek the benefit of principle of peak credit. Before the Revenue authorities, this contention was not even raised. No material was produced regarding the same.Considering such circumstances, we do not find any error in the view of the Tribunal. - Decided against assessee

Summary

Issues:
1. Addition of unexplained cash credit under section 68 of the Income Tax Act.
2. Addition of unaccounted income from undisclosed sources.
3. Confirmation of additions without considering case laws and submissions.
4. Treatment of entire deposits in bank accounts as income.
5. Rejection of alternate plea to tax peak credit of bank accounts.

Analysis:

Issue 1: Addition of unexplained cash credit under section 68 of the Income Tax Act
The assessee challenged the additions of ?13.22 lacs and ?12.55 lacs made by the Assessing Officer and confirmed by the CIT[Appeals] and the Tribunal under Section 68 of the Income Tax Act. The assessee failed to disclose the source of cash deposits in undisclosed bank accounts, attributing them to friends without providing names or addresses. The Assessing Officer considered these transactions as unaccounted income from undisclosed sources, leading to the additions. The CIT[Appeals] and the Tribunal upheld these additions based on the lack of genuine and creditworthy explanations from the assessee.

Issue 2: Addition of unaccounted income from undisclosed sources
The Tribunal confirmed the additions of cash deposits/cheques credited in the assessee's bank accounts as unexplained income. The assessee's explanations, first attributing the deposits to friends and later claiming them as business transactions, were found to lack credibility and evidence. The Tribunal rejected the peak credit principle invoked by the assessee, emphasizing the absence of genuine evidence supporting the transactions. The Tribunal's decision was based on the lack of substantiated explanations and evidence provided by the assessee.

Issue 3: Confirmation of additions without considering case laws and submissions
The Tribunal considered the submissions and case laws presented by both parties but ultimately affirmed the additions based on the lack of credible explanations and evidence from the assessee. The Tribunal highlighted the importance of genuine and creditworthy evidence in such proceedings, which the assessee failed to provide, leading to the confirmation of the additions.

Issue 4: Treatment of entire deposits in bank accounts as income
The Tribunal upheld the treatment of entire deposits in the bank accounts as unexplained income, rejecting the assessee's claims regarding the nature of the transactions. The Tribunal found the assessee's explanations inconsistent and lacking in supporting evidence, leading to the decision to treat the deposits as undisclosed income from unexplained sources.

Issue 5: Rejection of alternate plea to tax peak credit of bank accounts
The Tribunal rejected the assessee's plea to tax peak credit of the bank accounts, citing the lack of genuine evidence and credibility in the explanations provided. The Tribunal found the assessee
's arguments regarding peak credit principle unsubstantiated and inconsistent with the facts of the case, ultimately affirming the additions made by the lower authorities.

In conclusion, the High Court dismissed the tax appeal, upholding the Tribunal's decision to confirm the additions of unexplained cash credit and unaccounted income from undisclosed sources. The Court found no error in the Tribunal's view, considering the lack of credible explanations and evidence provided by the assessee throughout the proceedings.