2017 (3) TMI 796 - AT - Income Tax

Addition of peak of cash deposited in bank account - Held that - We note that against the cash deposits of ₹ 15.48 lacs, the assessee has sought to explain a part of it to the extent of ₹ 6.84 lacs to be out of own accumulated capital and out of wife s past and current savings and loan from relatives etc. combined together. We simultaneously note that the explanation of the assessee is generic without any substantive corroboration of cash flow generated and deposited after changing hands. The own accumulated capital in cash of ₹ 2,40,525/- on the ground that the assessee is in practice for long does not cut ice. The assessee being a professional and an educated person is expected to explain the cash deposits meticulously. The assessee has miserably failed in doing so and is seeking to take refuge of generic and bald possibilities. The whole explanation is completely bizarre and is tainted with conjectures. We are not inclined to be drifted by the case made out by the assessee based on vague possibilities. In the absence of cogent evidence, we are not willing to disturb additions made by the AO by adopting peak credit theory which is quite just and fair. The assessee is taking shelter of a designed theory to merely fill up the explanation of cash deposits by roping in theory of deposits out of past savings etc. as an afterthought which is quite fluid without any supporting evidence. It does not augur well to common sense that a person reporting meager income of less than 2 lakhs p.a. would retain idle cash in hand of ₹ 9.56 lakhs (5 time of annual earning) at the beginning of the year as claimed. - Decided against assessee Alternative plea of the assessee that while computing the peak amount, certain cheque entries of ₹ 1,34,308/- has been wrongly included if found to be true, deserves acceptance. This aspect is untested before the lower authorities. Accordingly, the assessee shall be at liberty to explain this aspect to the AO and seek suitable relief thereon on AO being satisfied on such contentions. To this limited extent, the relief is granted to the assessee subject to verification by the AO as considered expedient.

Summary

Issues:

1. Addition of unexplained cash deposits in bank account.
2. Application of peak credit theory.
3. Consideration of cash deposits from family members.
4. Inclusion of cheque entries in peak amount calculation.

Analysis:

Issue 1: Addition of unexplained cash deposits in bank account
- The assessee, a medical practitioner, declared a total income of &8377; 1,93,765 for AY 2009-10.
- The AO observed cash deposits of &8377; 15,48,800 in the bank account not reflected in regular books.
- Assessee explained deposits sourced from accumulated capital, wife's savings, and loans from relatives.
- AO added &8377; 8,26,634 as unexplained deposits under peak credit theory.
- CIT(A) affirmed AO's decision, noting lack of justification for large cash deposits.
- Tribunal found assessee's explanation generic and lacking substantive corroboration.
- Assessee failed to provide evidence for cash flow, leading to dismissal of appeal.

Issue 2: Application of peak credit theory
- Assessee sought relief under peak credit theory, claiming part of deposits from family members.
- Tribunal upheld AO's decision, considering the explanation as generic and lacking evidence.
- Peak credit theory applied by AO deemed fair and just, not disturbed by Tribunal.

Issue 3: Consideration of cash deposits from family members
- Assessee argued for exclusion of cash received from family members in peak credit calculation.
- Tribunal rejected plea, finding lack of successful correlation of alleged cash receipts from family members.

Issue 4: Inclusion of cheque entries in peak amount calculation
- Assessee contended that certain cheque entries of &8377; 1,34,308 were wrongly included in peak amount.
- Tribunal granted relief on this aspect, allowing assessee to explain to AO for suitable relief.

In conclusion, the Tribunal partly allowed the appeal, granting relief on the inclusion of cheque entries while upholding the decision on unexplained cash deposits and application of peak credit theory. The Tribunal emphasized the importance of providing concrete evidence to support claims and dismissed generic explanations without substantive corroboration.