2019 (9) TMI 344 - AT - Income Tax

Addition on account of unproved liabilities / Creditors - addition u/s 68 - HELD THAT - We are of the view that the assessee has not discharged the onus cast upon him under section 68 of the Act. The mere receipt of the amounts by account payee cheque does not mean that the credit is genuine. The assessee has to establish the identity of the creditor, the capacity of the creditor to advance the amount in question and prove the genuineness of the transaction. Assessee has failed to produce any of these details, leading him to observe that the assessee has not produced any details and supporting evidence of ledger account, supporting entries of the respective balance sheet of the parties, etc. In the absence of any clinching evidence, it cannot be said that the assessee has discharged the onus under section 68 of the Act. - Decided against revenue Addition of un-explained cash deposits - CIT(A) rejected this explanation put forth by the assessee on the ground that proper details were not filed in support of the claim - HELD THAT - Mere consent alone cannot confer jurisdiction to make an assessment. The additions made should be based on corroborative material evidence and cannot be made merely on the concession by the assessee. In this view of the matter, we are inclined to accept the contentions of the assessee that the addition in respect of cash deposits made in the assessee s bank account in the year under consideration should be based on peak credit method. The assessee has furnished the working of peak credit before us showing the peak credit of ₹ 10,70,000/-; but this has not been examined by the authorities below. We, therefore, are of the view that the matter be restored to the file of the AO with a direction to verify the computation of peak credit filed and thereafter to restrict the addition in respect of unexplained cash deposits in the assessee s bank account to the peak credit.

Summary

Issues:
1. Unproved liabilities and creditors
2. Charging of interest under section 234A, 234B, and 234C of the Income Tax Act
3. Unexplained cash deposits in the bank account

Unproved Liabilities and Creditors:
The case involved an individual assessee who declared Nil Income for Assessment Year 2009-10 but faced scrutiny due to Long Term Capital Gains (LTCG) claimed as exempt under section 10(37) of the Income Tax Act. The Assessing Officer (AO) made various additions to the income, including unproved sums payable, interest income not offered to tax, and unexplained cash deposits. The assessee appealed these additions before the CIT(A), who partially allowed relief by upholding some additions. The CIT(A) sustained the addition of unproved liabilities to the extent of ?4,00,000 out of the original ?13,70,330. The assessee further appealed this decision, challenging the sustained additions.

Charging of Interest under Section 234A, 234B, and 234C:
The assessee contested the charging of interest under section 234A, 234B, and 234C of the Act. The Tribunal upheld the AO's action in charging interest, citing the mandatory nature of interest as per the Act. The Tribunal directed the AO to re-compute the interest chargeable, if any, while implementing the order. The decision was based on the precedent set by the Hon'ble Apex Court in a relevant case.

Unexplained Cash Deposits in the Bank Account:
The dispute centered on unexplained cash deposits of ?35,20,000 in the assessee's bank account. Initially, the assessee agreed to an addition of this amount due to unexplained cash deposits. However, during the appeal, the assessee retracted this admission, claiming the deposits were from earlier withdrawals. The CIT(A) rejected this explanation, demanding proper details to support the claim. The Tribunal considered the arguments from both sides and concluded that the addition should be based on the peak credit method. The matter was directed back to the AO to verify the computation of peak credit and restrict the addition to the peak credit amount of ?10,70,000. The Tribunal held in favor of the assessee on this issue.

This detailed analysis of the judgment highlights the key issues of unproved liabilities and creditors, charging of interest under specific sections of the Income Tax Act, and unexplained cash deposits in the bank account. The Tribunal's decision on each issue was based on the evidence presented, legal precedents, and the requirements of the Income Tax Act.