2017 (2) TMI 291 - AT - Income Tax

Addition of cash deposited in to the bank accounts - peak deposits surrendered by assessee - Held that - Admittedly, neither any other source of income has been pointed out by AO nor any investment out of withdrawals from bank has been shown. Under such circumstances, assessee s explanation that both the bank accounts were in relation to its business, cannot be doubted. In our opinion, the peak surrendered by assessee should have been accepted by lower revenue authorities, in the absence of books of a/c. - Decided in favour of assessee

Summary

Issues:
Assessment u/s 144, Addition of unexplained cash deposits, Rejection of peak credit surrender, Charging of interest u/s 234B and 234C.

Assessment u/s 144:
The appellant appealed against the order passed by the ld. CIT(A), Faridabad, relating to AY 2009-10. The AO completed the assessment u/s 144 as the assessee did not comply with various notices. The AO observed discrepancies in the declared income and the cash deposits in the bank accounts of the assessee, leading to an addition of ?65,42,800. The appellant contended that the deposits were related to business activities. The CIT(A) confirmed the addition, rejecting the surrender of peak credit balance of ?9,20,934 made by the assessee before the AO. The ITAT considered the submissions and held that the deposits should be assessed in relation to the business, accepting the peak surrendered by the assessee due to the absence of proper accounting records.

Addition of unexplained cash deposits:
The AO noted significant cash deposits in the bank accounts of the assessee, which were not supported by proper documentation or regular business transactions. The AO added ?65,42,800 to the income of the assessee, as the source of the cash deposits could not be satisfactorily explained. The CIT(A) upheld this addition, rejecting the contention of the assessee regarding the surrender of peak credit balance. However, the ITAT ruled in favor of the assessee, considering the nature of the business and the absence of clear evidence to dispute the business-related nature of the deposits.

Rejection of peak credit surrender:
The CIT(A) rejected the surrender of peak credit balance made by the assessee before the AO, citing the lack of conclusive evidence to support the acceptance of the surrendered amount. The ITAT disagreed with this decision, emphasizing that in the absence of proper accounting records and clear evidence of income sources other than the business activities, the peak surrendered by the assessee should have been accepted by the revenue authorities.

Charging of interest u/s 234B and 234C:
The appellant raised concerns regarding the charging of interest u/s 234B and 234C by the AO. The ITAT did not provide specific details on this issue in the summary provided.

In conclusion, the ITAT allowed the assessee's appeal, overturning the addition of unexplained cash deposits and emphasizing the acceptance of the peak credit balance surrendered by the assessee. The judgment highlighted the importance of considering the nature of business activities and the absence of proper accounting records while assessing cash deposits in bank accounts for tax purposes.