2020 (9) TMI 227 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 69A - cash deposits made by the assessee in his Bank account - addition of only the peak deposits of cash - HELD THAT - We find that in the assessment order passed for A.Y. 2012-13 u/s 147 r.w. 143(3), the income declared by the assessee has been accepted and no addition on account of undisclosed source u/s 69A of the Act has been made. In such a situation following the principle of consistency, we are of the view that the addition of the entire cash deposits in the assessee s Bank account is uncalled for and find force in the submission of the AR that only the peak cash deposits be considered as income of the Assessee. Before us, assessee has filed the working of the peak credit of deposits. We find that there is no finding of the lower authorities on that aspect. Considering in earlier years the addition has been made only on the peak deposits, we direct the AO to make the addition of only the peak cash deposits during the year. We accordingly direct the AO to examine the working of peak cash deposits furnished by the assessee and thereafter make the addition of the peak amount. Thus the ground of the Assessee is partly allowed.

Summary

Issues:
Addition of cash deposits in the bank account under section 69A of the Income Tax Act, 1961.

Analysis:

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) relating to the Assessment Year 2011-12. The assessee, engaged in trading steel tubes, declared total income of ?3,27,553/-. The case was selected for scrutiny, and the assessment framed by the Assessing Officer determined the total taxable income at ?61,79,610/-. The assessee appealed the decision of the AO before the CIT(A), who dismissed the appeal. The grounds of appeal raised various issues, primarily contesting the addition of ?58,52,055/- made by the AO.

The AO noted that the source of cash deposits in the assessee's bank account was examined based on AIR information. The assessee made cash deposits aggregating to ?58,52,055/-. Despite explanations provided, the AO found inconsistencies and treated the cash deposits as undisclosed income under section 69A of the Act. The CIT(A) upheld the AO's decision, leading the assessee to appeal before the ITAT.

During the proceedings, the assessee explained that cash deposits were made by individuals from Bihar at various locations, which were then withdrawn and delivered in Delhi as per the depositors' instructions. The assessee charged a commission for these services. The assessee argued for consistency, citing previous assessments where only peak deposits were added. The ITAT considered the facts and directed the AO to add only the peak cash deposits as income, following the principle of consistency.

The ITAT found merit in the assessee's argument regarding the treatment of cash deposits based on past assessments. It directed the AO to consider only the peak cash deposits as income, as done in previous assessments. The ITAT partially allowed the appeal, emphasizing the importance of consistency in tax assessments.

In conclusion, the ITAT's judgment focused on the treatment of cash deposits in the bank account, emphasizing the need for consistency in assessing income based on past practices. The decision highlighted the principle of considering only peak deposits as income, directing the AO to follow this approach in determining the taxable amount.