2021 (9) TMI 1249 - AT - Income Tax

Addition u/s 68 - Unexplained deposits - HELD THAT - Cash deposit on 12.11.2010 which was available with the assessee as per her bank statement and which was then withdrawn on 13.01.2011. It is noted that the claim of the assessee regarding frequent cash withdrawal and deposit for the purposes of availing OD limit has been accepted by the AO in his remand report for the year under consideration and duly considered and accepted by the ld. CIT(A) while working out the peak credit. Where similar transactions of deposits and withdrawals exist in the previous financial year the explanation of the assessee duly supported by her bank statements cannot be disputed without any adverse material on record - assessee has disclosed income in her return of income and which has been accepted by the AO which again explain the source of part of deposits in the bank account. We therefore find that the assessee has reasonably explained the source of deposits in her bank account and the additions so confirmed by the ld. CIT(A) is hereby directed to be deleted - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of income - Peak credit theory application - Explanation of source of funds - Benefit of telescoping income - Onus of proof on assessee - Adverse material requirement for disputing transactions.

Analysis:
The appeal was filed against the addition of income by the Assessing Officer (AO), reduced by the ld. CIT(A) based on the peak credit theory. The appellant argued that the source of the peak credit, explained through a cash withdrawal, was not considered, leading to the denial of telescoping benefits related to income declared in the return for A.Y. 2012-13.

The appellant contended that regular income, savings from household expenses, and a cash deposit from a known source supported the funds in question. Citing a precedent, the appellant emphasized the acceptance of similar explanations in previous cases by the Jaipur Benches, reinforcing the legitimacy of the source of funds.

In contrast, the ld. DR supported the CIT(A)'s decision, highlighting the appellant's failure to explain a preceding deposit related to the significant cash withdrawal. Relying on a Supreme Court case, the ld. DR argued that the denial of benefits under the peak credit theory was justified due to the lack of a complete explanation from the appellant.

Upon review, the Tribunal emphasized the onus on the assessee to prove the source of funds, noting that the explanation provided by the appellant regarding cash withdrawals and deposits, supported by bank statements, was satisfactory. The Tribunal found that the appellant's disclosure of income in the return, along with the accepted explanation for transactions, sufficiently clarified the source of funds, leading to the deletion of the confirmed additions.

In conclusion, the Tribunal allowed the appeal, overturning the decision to confirm the additional income, as the appellant had reasonably explained the source of funds through documented transactions and income disclosures.