2020 (11) TMI 696 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - If the assessee fails to give any explanation of the source and nature of money deposited in his bank account, definitely the provisions of Section 68 of the income tax act applies, as the assessee has failed to discharge initial onus cast upon him. In absence of any evidence, that he is carrying on business as a commission agent, cannot be believed. Even if it is believed, that he is a commission agent, the ignorance of the fact that who is principal, on whose behalf he is working, is not known to the assessee or he is not disclosing, it clearly shows that addition is required to be made in the hands of the assessee as there is no explanation about the source and nature of credits - Addition on account of unexplained cash credit being cash deposited in the bank account of the assessee confirmed. Claim of the assessee to grant the benefit of peak credit - No substantial the argument in view of the decision in case of CIT versus DK Garg 2017 (8) TMI 450 - DELHI HIGH COURT it is held that that where an assessee was unable to explain the sources of deposits and the corresponding payments , he was not entitled to get the benefit of peak credit . If the assessee, had wanted to avail of the benefit of the peak credit , he ought to have disclosed all the facts within his knowledge concerning the credit entries in the accounts. He had to explain with sufficient details the sources of all the deposits in his accounts as well as the corresponding destinations of all payments from the accounts. He should have been able to show that the money had been transferred through banking channels, from whom to his bank account, the identity of the creditors and that the money paid from the accounts of the assessee. The assessee had to discharge the primary onus in that regard. The peak credit worked out by the assessee, on the basis that the principle of peak credit applied, notwithstanding the failure to explain each of the sources of the deposits and the corresponding destinations of the payments without squaring them off, was not permissible - Decided against assessee.

Summary

Issues:
Appeal against order of CIT(A) upholding addition u/s 68 - Unexplained cash credit - Failure to discharge onus - Non-disclosure of bank account - Addition of unexplained cash deposit - Challenge on maintaining books of accounts - Peak credit benefit claim rejected.

Analysis:
1. The appeal was filed against the CIT(A)'s order upholding the addition of unexplained cash credit of ?57,00,240 under section 68 of the Income Tax Act. The assessing officer noted that the assessee, a salaried individual, deposited significant cash in multiple bank accounts, including an undisclosed ICICI bank account. The assessee failed to provide details of the source of this cash, leading to the addition. The CIT(A) found the assessee's explanations unsubstantiated, especially regarding business transactions and lack of creditor details.

2. The assessee contended that the cash deposited was on behalf of retail traders, withdrawn for business purposes, and earned a commission. However, the lack of evidence supporting these claims led to the rejection of the arguments. The departmental representative supported the lower authorities' decision, emphasizing the absence of details on cash sources and recipients. The assessee's failure to maintain proper records and inability to prove the legitimacy of cash deposits were crucial factors in upholding the addition u/s 68.

3. The tribunal upheld the lower authorities' decision, emphasizing the assessee's responsibility to explain the source of cash deposits. The lack of evidence regarding business activities, creditor details, and purpose of cash transactions led to the confirmation of the addition. Additionally, the rejection of the peak credit benefit claim was based on the assessee's failure to disclose essential details about cash transactions, as per the Delhi High Court precedent in CIT vs. DK Garg. The tribunal dismissed all grounds of appeal, affirming the addition of ?57,00,240 as unexplained cash credit.

In conclusion, the tribunal's judgment in this case highlights the importance of maintaining proper records, providing substantiated explanations for cash transactions, and fulfilling the onus of proof in income tax matters. The rejection of the peak credit benefit underscores the necessity of disclosing comprehensive details to support financial claims and transactions.