2015 (7) TMI 114 - AT - Income Tax

Unexplained deposits in bank account - appellant is a housewife - Held that - Ld. Counsel for the assessee contends that ld. CIT(A) has given clear findings of facts and held that the opening cash of 2.75 lacs and withdrawal of ₹ 1 lac contributed towards construction were not considered, besides there was no justification in ignoring the cost of material of ₹ 1,32,176/- as indicated by ld. CIT(A). The factual discrepancies in AO s working of Annex. B have been demonstrated by ld. CIT(A), his order deserves to be upheld on this issue. Un-explained investment in the construction of residential house - Held that - CIT(A) from the bank statement, endorsed the correct fact that investment in the construction works was made partly in the Financial Year 2007-08. This has been impliedly acknowledged by the learned AO while discussing this addition in the body of the assessment order. These vital facts emerging from record cannot be ignored on ipsi-dixit by manufacturing some lacunae in assessee s reply. Therefore ld. CIT(A) s clear finding of fact that the investment in construction of house was made in AY 2008-09 & 2009-10 is based on proper verification of facts on record and there is no reason to disturb such findings of facts. It is further contended that ground iv of the revenue has no meaning inasmuch as the merits of all the credit entries stand proved by the assessee which is manifest from the order of ld. CIT(A). consequently there remains no issue about identity, genuineness and creditworthiness of these entries. In the light of above observations and working, the conclusions so arrived at by the learned CIT (A) are very fair, reasonable and logical so we rely upon such findings of the learned CIT (A). No reason to interfere with ld. CIT(A) order who has co-terminus powers with AO and can do what AO failed to do; except the alternate plea of the assessee about the Axis bank a/c being joint account. This becomes more relevant in the peculiar background of assessee s being a house maker, having no knowledge of construction, debit and credit entries in the bank and prolonged and terminal illness of the husband. None of which is questioned by lower authorities Therefore, if at all it is held that ₹ 8,01,050/- remained unexplained then assessee being a joint a/c holder cannot be saddled with entire addition. The same is to be treated equally half in the hands of husband and wife. In view thereof we hold that the sustainable addition in the hands of assessee be restricted to 4,00,550/-. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 8,00,000/- on account of unexplained deposits in the assessee's bank account.
2. Deletion of Rs. 20,73,876/- on account of unexplained investment in construction of house.
3. Restriction of addition from Rs. 1,19,73,500/- to Rs. 8,01,050/- based on 'Peak Theory'.
4. Issues related to the identity, genuineness, and creditworthiness of creditors.

Issue-wise Detailed Analysis:

1. Addition of Rs. 8,00,000/- on account of unexplained deposits:
The assessee, a housewife with no regular source of income, was found to have unexplained deposits amounting to Rs. 8,00,000/- in her bank account. The learned CIT(A) confirmed this addition made by the AO, despite the assessee's argument that she had no regular income and the deposits were not adequately explained.

2. Deletion of Rs. 20,73,876/- on account of unexplained investment in construction of house:
The AO added Rs. 20,73,876/- to the assessee's income, citing unexplained investment in house construction. The assessee provided a valuation report and explained the sources of funds, including withdrawals from a joint bank account with her husband and other family members. The CIT(A) deleted this addition, noting that the funds were adequately explained through withdrawals and the construction was spread over two financial years. The CIT(A) also noted that the AO did not consider the opening cash balance and other withdrawals, which justified the deletion of the addition.

3. Restriction of addition from Rs. 1,19,73,500/- to Rs. 8,01,050/- based on 'Peak Theory':
The AO initially added Rs. 1,19,73,500/- to the assessee's income, citing unexplained bank transactions. The CIT(A), however, reduced this to Rs. 8,01,050/- using the 'Peak Theory', which considers the highest balance in the bank account as the peak credit. The CIT(A) found that the peak credit balance on 29.11.2008 was Rs. 8,01,050/-, resulting from the rotation of overdraft funds rather than fresh deposits. The assessee's representative argued that this peak balance was due to a transfer credit entry of Rs. 25,00,000/- and not fresh credits, which the CIT(A) did not fully appreciate.

4. Issues related to the identity, genuineness, and creditworthiness of creditors:
The revenue's appeal included concerns about the identity, genuineness, and creditworthiness of the creditors. The CIT(A) addressed these concerns by verifying the bank statements and the rotation of overdraft funds. The CIT(A) concluded that there were no fresh deposits and that the funds were adequately explained. Consequently, the issues related to the identity, genuineness, and creditworthiness were deemed resolved.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, including the deletion of Rs. 20,73,876/- for unexplained investment in house construction and the reduction of the addition from Rs. 1,19,73,500/- to Rs. 8,01,050/- using the 'Peak Theory'. The Tribunal also acknowledged the peculiar circumstances of the assessee, a housewife with no regular income, and her husband's critical illness. The sustainable addition was further reduced to Rs. 4,00,550/- considering the joint operation of the bank account. The assessee's appeal was partly allowed, and the revenue's appeal was dismissed.