2020 (4) TMI 301 - AT - Income Tax

Addition u/s 68 - Cash found to have been deposited in two bank accounts - onus to prove that the credit entries appearing therein were not in the nature of income - HELD THAT - Onus was on assessee to prove that the credit entries appearing therein were not in the nature of income. It also emerges that the assessee could not file plausible explanation for credit entries before lower authorities Many discrepancies were found in documentary evidences submitted by the assessee in support of the fact that cash deposits were out of proceeds of agricultural produce. Similar is the position before us wherein the assessee is unable to file any additional evidence to support the said fact. The perusal of computation of income would show that the assessee has already reflected agricultural income of ₹ 0.73 Lacs in the return of income. Therefore, the plea the cash deposits were sourced out of agricultural income could not be accepted. Having said so, equity would demand that items which are capital in nature or the transactions which do not give rise to any taxable income should not be considered as assessee s income since only true income was to be brought to tax. Further, the benefit of cash withdrawals from the said bank accounts should be granted to the assessee. Entire credit received through banking channels aggregating to ₹ 15,82,636/- (₹ 4,35,000/- ₹ 11,47,636/-) could not be considered as assessee s income since outward payments have also been made from the said bank accounts. It is noted that besides rental income agricultural income, the only source of income for the assessee was earnings from shop. Considering this fact, we are of the opinion that a reasonable estimation of profit against these receipts would meet the end of justice. We estimate the same @10% which comes to ₹ 1,58,264/-. The balance addition of ₹ 20,57,059/- shall stand confirmed. The ground raised by the assessee stand partly allowed. Grant of TCS credit which is reflected in Form 26AS - HELD THAT - AO is directed to verify the same and grant due credit of TCS as per law. The additional ground stand allowed for statistical purposes.

Summary

Issues:
Assessment of unexplained investments, Exclusion of capital receipts and non-taxable receipts, Peak Credit Theory application, TCS credit verification.

Assessment of Unexplained Investments:
The appeal contested the order of the Commissioner of Income-Tax Appeals regarding the addition of ?47,95,403 made by the Assessing Officer. The reassessment was triggered by cash deposits in two undisclosed bank accounts. The assessee claimed the deposits were from agricultural income but failed to provide satisfactory evidence. Discrepancies in submitted documents led to the addition of ?49.95 lakhs to the income. The CIT(A) partially allowed the appeal, confirming ?47.89 lakhs. The Tribunal directed the exclusion of certain credit entries, reducing the addition to ?20.57 lakhs.

Exclusion of Capital Receipts and Non-Taxable Receipts:
The assessee sought exclusion of capital receipts and non-taxable receipts using the Peak Credit Theory after reducing such amounts. The Tribunal considered the nature of the transactions and directed the exclusion of specific credit entries from the addition. The Tribunal estimated a reasonable profit against certain receipts, reducing the confirmed addition to ?20.57 lakhs.

Peak Credit Theory Application:
Both the assessee and the Department presented arguments regarding the application of the Peak Credit Theory. The assessee aimed to exclude capital and non-taxable receipts, while the Department emphasized the undisclosed bank accounts and the resulting tax liability. The Tribunal assessed the evidence and directed the exclusion of specific credit entries, reducing the confirmed addition and allowing the appeal in part.

TCS Credit Verification:
An additional ground sought direction for granting TCS credit of ?2,71,726 reflected in Form 26AS. The Tribunal directed the Assessing Officer to verify and grant the TCS credit as per law. This additional ground was allowed for statistical purposes.

This judgment addressed the issues of assessing unexplained investments, excluding capital and non-taxable receipts, applying the Peak Credit Theory, and verifying TCS credit. The Tribunal considered the evidence presented, directed exclusions from the addition, and partially allowed the appeal while granting the TCS credit as requested.