2022 (9) TMI 232 - AT - Income Tax

Unexplained cash credits - addition of peak credit - Assessee stated that the alleged deposits were made out of the sale proceeds of rice and paddy and also loans from friends and relatives received from time to time but could not produce any evidence or proof in support of this claim - HELD THAT - Though the assessee was required to file complete details of such friends and relatives and also the details of sales but the same has not been done at any stage. The only way out left is to sustain the addition only to the extent of peak credit in such bank account. There is no specific detail of the calculation of peak credit from either of the sides and neither it is a case of cash deposits and cash withdrawals for which peak credits theory is perfectly applicable. But keeping in view that the alleged credits in the bank account in the form of cash and cheque have only been utilized for making payment to Techno Shares Stocks Pvt. Ltd. and the assessee having incurred loss on such trading of shares is evidenced by the financial ledger appearing under the PAN number of the assessee on Form No. 10BB and also accepting the fact that the said cash deposit possibly contains the element of short term loans taken from friends and relatives, past savings, sale proceeds of the trading business and also looking to the fact that the peak credit in the bank account - Appeal filed by the assessee is partly allowed.

Summary

Issues:
- Appeal against order passed under section 250 of the Income Tax Act, 1961 for Assessment Year 2015-16.
- Addition of undisclosed income under section 69A of the Act based on unexplained bank account credits.
- Dispute regarding the entire amount credited in the undisclosed bank account versus peak credit balance.
- Applicability of peak credit theory in determining additions for unexplained bank account credits.

The judgment pertains to an appeal against an order passed under section 250 of the Income Tax Act, 1961 for the Assessment Year 2015-16. The case involved the addition of undisclosed income under section 69A of the Act due to unexplained bank account credits. The appellant, engaged in trading rice and paddy, had unexplained credits in a bank account not disclosed in the income tax return. The assessing officer added the credits as undisclosed income, including bank interest, resulting in a total assessed income of Rs. 25,31,278.

The appellant challenged this addition before the Commissioner of Income-tax (Appeals) [CIT(A)], who upheld the addition, emphasizing the lack of evidence supporting the source of the cash deposits and their utilization to make payments to a specific share broker. The CIT(A) dismissed the grounds of appeal raised by the assessee, leading to the current appeal before the Tribunal.

During the Tribunal proceedings, the appellant argued that only the peak credit balance of the undisclosed bank account should be added, not the entire amount credited during the year. The appellant contended that the source of deposits included business income, loans, and funds from share trading activities. The Departmental Representative supported the lower authorities' orders.

After considering the contentions and evidence, the Tribunal observed that the appellant had not disclosed the bank account and utilized the credited amount for trading activities. The Tribunal acknowledged the lack of complete details regarding the source of funds but noted the losses incurred by the appellant in trading shares. Consequently, the Tribunal decided to sustain an addition of Rs. 8 lakhs to cover the peak credit balance and unexplained deposits, deleting the remaining additions of Rs. 14,62,538. The Tribunal aimed to be fair to both parties by considering the circumstances and evidence presented.

In conclusion, the Tribunal partly allowed the appeal, emphasizing the application of the peak credit theory to determine additions for unexplained bank account credits, ensuring a balanced decision based on the available facts and fairness to both parties.