2019 (12) TMI 823 - AT - Income Tax

Enhancing the addition u/s.251(10) - cash deposited in Bank accounts treated as alleged unexplained cash deposits - HELD THAT - We find that the bank account of the assessee is showing cash deposits and simultaneously cash withdrawals within a day or today. Therefore, the entire cash deposits cannot be treated as unexplained as there is the debit and credit on both account. It is further discernable from the pattern of cash deposit as reflected from the bank account that these deposits are simultaneously being withdrawn. Therefore, in such a situation the only course of action is to consider the peak balance for addition, which is supported by various decisions cited by ld. counsel. We find that the peak balance as on 18- 09-2019 is at ₹ 1,68,025/- accordingly the addition of ₹ 40,81,465/- is restricted to peak balance of ₹ 1,68,025/-. Accordingly, all the above grounds of appeal are partly allowed. Penalty u/s 271(1)(c) - HELD THAT - Penalty u/s.271(1)(c) was initiated for furnishing inaccurate of particular of incomes, whereas the penalty has been imposed by the AO on account of concealment of income. Therefore, the penalty is not tenable in law, in the light of decision of Hon ble Bombay High Court in the case of CIT v. Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT wherein it was held that where the AO was initiated penalty proceedings for furnishing inaccurate particulars of income and imposing penalty for concealment of income, the order imposing penalty had to be made only on ground of which penalty proceedings had been initiated and it could not be on fresh ground of which assessee had no notice, penalty has to be deleted. Penalty levied u/s.271(1)(c) is not sustainable in law as no specific charge was levied, hence it is cancelled. Accordingly, the appeal of the assessee is allowed.

Summary

Issues involved:
1. Additional grounds raised by the assessee challenging the CIT(A)'s order enhancing the addition of cash deposits.
2. Proper consideration of peak balance and GP additions in determining undisclosed income.
3. Imposition of penalty under section 271(1)(c) for concealment of income.

Analysis:

1. The assessee raised additional grounds challenging the CIT(A)'s order enhancing the addition of cash deposits. The Tribunal allowed the additional ground to be admitted, considering it an extension of the original ground. The CIT(A) had enhanced the addition from ?6,76,372 to ?40,81,465, based on the peak balance and GP additions. The Tribunal found that the peak balance as of a specific date was ?1,68,025, restricting the addition to this amount. The Tribunal considered various decisions cited by the assessee's counsel in support of this position, ultimately partly allowing the appeal.

2. The Tribunal delved into the proper consideration of peak balance and GP additions in determining undisclosed income. The AO had made an addition of ?6,76,372 based on cash deposits in the assessee's bank account. The CIT(A) enhanced this to ?40,81,465, treating the entire cash deposit as income from undisclosed sources. The assessee argued that only the peak amount should be considered for additions, not the entire cash deposits. The Tribunal agreed, restricting the addition to the peak balance of ?1,68,025, citing various decisions supporting this approach. Consequently, the Tribunal partly allowed the appeal on this issue.

3. Regarding the imposition of penalty under section 271(1)(c) for concealment of income, the Tribunal found that the penalty was initiated for furnishing inaccurate particulars of income, while the AO imposed it for concealment of income. Citing relevant case law, the Tribunal concluded that the penalty was not sustainable in law. Relying on decisions such as CIT v. Samson Perinchery, the Tribunal held that the penalty levied under section 271(1)(c) was not justified and therefore cancelled. As a result, the appeal on this issue was allowed.

In conclusion, the Tribunal partly allowed the appeal related to the additional grounds raised by the assessee, the consideration of peak balance and GP additions, and fully allowed the appeal concerning the imposition of penalty under section 271(1)(c) for concealment of income.