2017 (7) TMI 912 - AT - Income Tax

Unexplained cash deposit in bank account - Peak credit addition - Held that - From the documents produced by the assessee, the A.O found that agricultural receipt in the form of 6R only contained ₹ 1,29,600/- related with the assessee Shri Jailly Goraya. He, therefore, gave credit to this extent and made addition of ₹ 3 lakhs which has been upheld by the ld. CIT(A). Although it is the argument of the ld. AR that no addition can be made since the entire income is from agriculture, we find no merit in the same. From the copy of assessment order, it is notice that apart from agricultural income, the assessee has income from leasing of car. Therefore, it cannot be said that the entire income of the assessee is from agriculture. Since the assessee had explained before the A.O that the source of deposits of ₹ 4,29,000/- is out of agricultural produce of ₹ 2,38,500/-, we accept the source to this extent as explained. The balance amount of ₹ 1,90,500 is sustained. So far as the addition of ₹ 78,40,770/- made by the A.O the assessee cannot explain the non disclosure of the said bank account as ignorance of law or that he was not conversant with the intricacies of accountancy or tax proceedings. However, it is also a fact that the said bank account contains both deposits as well as withdrawals. It is an accepted principle that when the assessee is unable to explain the deposits in a particular bank account, the entire deposits cannot be added to the total income and only the peak credit has to be made when there are both cash deposits and cash withdrawals. In the instant case admittedly, there were both cash deposits as well as cash withdrawals on various dates. Therefore, the ld. CIT(A), in our opinion, was fully justified in sustaining the peak credit value for the addition u/s 69A of the Act. Accordingly, the same is upheld. Appeal filed by the assessee is partly allowed

Summary

Issues involved:
1. Unexplained cash deposits in bank accounts.
2. Addition of undisclosed bank account deposits.

Analysis:
Issue 1: The first issue in this case involves unexplained cash deposits in bank accounts. The Assessing Officer (A.O) observed various cash deposits and withdrawals in the assessee's bank accounts during the assessment proceedings. The A.O questioned the source of these deposits, and despite explanations provided by the assessee, discrepancies were found in the documentation. Consequently, the A.O added the unexplained cash deposits as unexplained investments under section 69 of the Income Tax Act. The Commissioner of Income Tax (Appeals) (CIT(A)) upheld the A.O's decision, leading to the assessee appealing against this addition.

Issue 2: The second issue pertains to the addition of undisclosed bank account deposits. The A.O discovered an undisclosed bank account of the assessee through AIR information. The assessee claimed ignorance of tax procedures and inability to recall details of fund providers for maintaining the bank balance. The A.O added the entire undisclosed bank account deposits, which the CIT(A) partially upheld, considering the principle of peak credit value for addition under section 69A of the Act. Both the assessee and the Revenue appealed against the CIT(A)'s decision.

Detailed Analysis:
1. The A.O added unexplained cash deposits after discrepancies were found in the documentation provided by the assessee. The CIT(A) upheld the addition, stating that the explained portion had been credited. The assessee argued that withdrawals could have been redeposited, leading to double addition. However, the CIT(A) disagreed, and the Tribunal upheld the addition of the unexplained cash deposits.

2. Regarding the undisclosed bank account deposits, the A.O added the entire amount, and the CIT(A) upheld the principle but considered the peak credit value for the addition under section 69A of the Act. The Tribunal dismissed both the assessee's and Revenue's appeals on this issue, upholding the CIT(A)'s decision.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, maintaining the additions made for unexplained cash deposits and undisclosed bank account deposits.