2016 (9) TMI 754 - AT - Income Tax

Undisclosed cash deposits - Held that - We find that the claim of the assessee that the deposits in this undisclosed bank account are nothing but sale proceeds and that the withdrawals from these undisclosed bank accounts, were purchases, is not supported by any documentary evidence whatsoever. The assessee has failed to prove its claim. Thus the First Appellate Authority was right in coming to a conclusion that the assessee has failed to discharge the primary onus to prove the source of cash deposits by relying on the decision of Hon ble Delhi High Court in the case of Indus Valley Promoters vs. CIT 2008 (4) TMI 1 - DELHI HIGH COURT and other case laws. Thus we uphold this finding. On the alternative plea of the assessee that, only the peak credit in this account has to be added, we are of the considered opinion that this plea is justified. Consistent with the view taken therein, we set aside the matter to the file of the A.O. with a specific direction that only the peak credit in this bank account should be brought to tax.

Summary

Issues:
1. Addition of cash deposits in bank accounts
2. Addition on account of alleged unaccounted household expenses

Analysis:

Issue 1: Addition of cash deposits in bank accounts
The appeal was against the order confirming the addition of cash deposits in bank accounts without considering the appellant's plea for assessment based on reasonable profit rate or PEAK theory. The appellant argued that the deposits were from unaccounted business sales, supported by the nexus with business activities and lack of other income sources. The AO observed the deposits as profit from unaccounted business. The appellant failed to provide evidence supporting the claim. The First Appellate Authority upheld the addition, stating the appellant did not discharge the burden of proof. The ITAT upheld the decision, citing the lack of documentary evidence and failure to prove the source of cash deposits.

Issue 2: Addition on account of alleged unaccounted household expenses
The AO made an addition for alleged unaccounted household expenses based on inflation and perceived daily running costs without substantial evidence. The appellant sought deletion of this addition. The ITAT found no fault in the First Appellate Authority's decision, dismissing the appeal on this issue.

The ITAT allowed the appeal in part, directing the AO to consider only the peak credit in the bank account for taxation. The decision highlighted the need for evidence to support claims and the burden of proof on the appellant. The judgment emphasized the importance of documentary evidence in tax assessments and the application of legal principles to determine additions based on peak credits in bank accounts.