2019 (11) TMI 1343 - AT - Income Tax

Addition of peak credit - Peak Credit working - credit of withdrawals - HELD THAT - CIT(A) has not given credit of withdrawal made on 27-09-2007 on the reasoning that the assessee has withdrawn money by using cheque. I do not find any rationale to this decision, since it is the assessee who has withdrawn money and hence the same should be given credit while working out peak credit. With regard to the withdrawal made on 28-09-2007, CIT(A) has not given credit for the same on the reasoning that the deposits have been made after expiry of 53 days. This time gap can be considered only if it is shown that the withdrawal made earlier was not available with the assessee when subsequent deposits were made. In the absence of any such material, I am of the view that the assessee should be given credit of withdrawal of ₹ 3.00 lakhs made. Accordingly, the observations made by Ld CIT(A) with regard to the above said two withdrawals are also liable to be set aside. Accordingly, set aside the observations made by Ld CIT(A) in paragraph 5.4 of his order. Since the assessing officer has not verified the peak credit workings, I restore this issue to his file for the limited purpose of verifying the peak credit workings and accordingly direct the AO to assessee 1/3rd of peak credit balance in the hands of the assessee.

Summary

Issues:
- Challenge to order by Ld CIT(A) for assessment year 2008-09
- Validity of reopening of assessment
- Addition relating to cash deposits sustained by Ld CIT(A)

Analysis:
1. Challenge to Ld CIT(A) Order:
- The appellant challenged the order by Ld CIT(A) for the assessment year 2008-09.
- Grounds 1, 6, and 7 were discussed, with ground 6 concerning the levy of interest u/s 234B being deemed consequential.
- Grounds 2 & 3 regarding the validity of reopening of assessment were not pressed by the Ld A.R and were dismissed.
- Remaining grounds focused on the addition related to cash deposits sustained by Ld CIT(A).

2. Cash Deposit Addition:
- The assessee, along with two others, maintained a joint bank account where a sum of ?20,39,000 was deposited during the year under consideration.
- The assessee failed to explain the sources of the deposits and claimed only 1/3rd of the deposit belonged to him.
- The AO made an addition of ?20,39,000 despite the claim.
- An identical addition was made in a previous assessment year, and the ITAT restricted the addition to 1/3rd of the peak amount of deposits.
- The Ld CIT(A) followed the ITAT's order but reduced the undisclosed income to ?18,39,000, directing the AO to assess 1/3rd of this amount in the hands of the assessee.

3. Appeal and Hearing:
- The appellant appealed the Ld CIT(A)'s decision.
- The Ld A.R argued against the observations made by Ld CIT(A) regarding the working of peak credit, presenting discrepancies in the calculations.
- The Ld D.R supported Ld CIT(A)'s order during the hearing.

4. Judgment and Decision:
- The tribunal examined the peak credit workings and discrepancies highlighted by the Ld A.R.
- Withdrawals not considered by Ld CIT(A) were found relevant and should have been included in the peak credit balance.
- The tribunal disagreed with Ld CIT(A)'s reasoning on certain withdrawals and directed the AO to assess 1/3rd of the peak credit balance in the hands of the assessee.
- The tribunal set aside Ld CIT(A)'s observations and restored the issue to the AO for verification of peak credit workings.

5. Final Decision:
- The tribunal allowed the appeal of the assessee for statistical purposes, pronouncing the order on 27th November 2019.