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2022 (8) TMI 759 - AT - Income TaxPeak credit Theory - Addition u/s 68 - Unexplained cash credit - application of theory of peak credit on cash receipts and cash withdrawals - HELD THAT - Tribunal in assessee s group case 2017 (4) TMI 1441 - ITAT CHENNAI upheld the application of theory of peak credit on cash receipts and cash withdrawals. Subsequently, the revenue s appeal against this decision has not been admitted by Hon ble High Court of Madras. We find that similar facts exist in the present case and Ld. CIT(A) has rightly applied this case law to adjudicate the issue. Therefore, no infirmity could be found in the impugned order to that extent. The peak credit has to be worked out properly by considering only cash receipts and cash withdrawals and the same is required to be verified by Ld. AO. The same is the plea of Ld. Sr. DR who has submitted that peak credit was not made available to Ld. AO and therefore, modification in directions is required. We find that the assessee has made deposited cash and withdrawn the same throughout the year. Accepting the plea of Ld. Sr. DR, the working of the peak credit shall be furnished by the assessee to Ld. AO who is directed to consider the same and restrict the addition to the extent of peak credit of cash receipts and cash withdrawals. The cheque entries shall be separately examined and readjudicated. The directions given in the impugned order stand modified to that extent.
Issues:
1. Appeal by Revenue challenging order of CIT(A) regarding unexplained cash credit. 2. Assessment of unexplained cash deposits and withdrawals by the assessee. 3. Application of peak balance theory in determining undisclosed income. 4. Power of CIT(A) to set aside assessment order. Analysis: Issue 1: Appeal by Revenue The Revenue appealed the CIT(A)'s decision regarding unexplained cash credit. The Revenue contended that the CIT(A) erred in basing the decision on judicial precedents and accepting the peak balance theory presented by the assessee. The Revenue argued that the CIT(A) overstepped by directing the AO to delete additions and provide the assessee with an opportunity. The Revenue sought to set aside the CIT(A)'s order and reinstate the AO's assessment. Issue 2: Assessment of Unexplained Cash Deposits The assessment revealed that the assessee, engaged in money lending, deposited significant cash amounts in various bank accounts. The AO reopened the case due to unexplained cash deposits totaling Rs.387.65 Lacs. The assessee claimed these were repayments from borrowers, recycled for further lending. However, as the assessee failed to substantiate with evidence, the AO treated the cash deposits as unexplained income under section 69A of the Act. Issue 3: Application of Peak Balance Theory During appellate proceedings, the assessee argued for the application of the peak credit theory, emphasizing that the cash deposits were part of a money lending business cycle. The CIT(A) agreed with the assessee, citing previous judgments where only peak credit was assessed. The CIT(A) directed the AO to delete the addition after verifying the peak credit balance, following judicial precedents and the doctrine of judicial discipline. Issue 4: Power of CIT(A) to Set Aside Order The Revenue challenged the CIT(A)'s power to set aside the assessment order. The Tribunal found that similar issues had been decided in previous cases and upheld the application of the peak credit theory. However, the Tribunal directed the AO to properly calculate the peak credit by considering only cash receipts and withdrawals, modifying the directions given by the CIT(A) and partially allowing the appeal. In conclusion, the Tribunal upheld the application of the peak credit theory but directed the AO to verify the peak credit calculation based on cash receipts and withdrawals, ensuring proper assessment of undisclosed income.
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